How to build cost projections?
Marketing Cost Projection follows similar principle of bottom-up calculation from customer cohorts and their respective input factors.
Specifically, we have to estimate 1. new customer acquisition costs and 2. retargeting costs for returning customers, separately, and then add them.
Example:
We are building cost projections for an e-commerce platform for Q1 2024:
It has 3 existing customer cohorts, to which the platform will send 2 messages per customer at a cost of ₹1 per message.
- Cohort A (joined in 2021): 5,000 customers,
- Cohort B (joined in 2022): 7,000 customers
- Cohort C (joined in 2023): 8,000 customers
Additionally, the platform is expecting in Q1 2024
- 1,000 new customers from Meta Ads at a projected CAC of ₹1,000 (from past trends/benchmarks)
- 500 new customers from Google Ads at a projected CAC of ₹1,500 CAC, and
- 300 new customers organically.
So, the marketing cost projection will be calculated so:
1. New Customer Acquisition Cost:
= 1,000 × ₹1,000 + 500 x ₹1,500 + 300 x 0 = ₹17,50,000.
2. Remarketing Cost:
= (5,000 + 7,000 + 8,000) × 2 × ₹1 = ₹40,000.
Total Marketing Cost:
Total Marketing Cost = Acquisition Cost + Remarketing Cost
= ₹17,50,000+₹40,000 = ₹17,90,000