Choosing Channels by What a Customer Costs

The price of a click is not the price of a customer. We hear this from contractors all the time: they are thrilled with an ad campaign because the clicks are cheap. Ask how many of those clicks turned into a phone call, and then how many of the calls turned into a signed job. Many cannot say.

They are measuring the price of attention and calling it the price of business. Those are two different things, and the gap between them is where a lot of small marketing budgets quietly disappear.

Three prices, and only one that pays the bills

Every channel has a cost per click or cost per impression, a cost per lead, and a cost per customer. The first is what the platform shows you. The second is what you pay for a person to raise a hand. The third is what you pay for a person who actually buys.

Only the last one can be set against what a customer is worth to you. A click cannot pay a crew, a lead cannot pay rent, and neither of them is revenue until somebody signs. So when you compare channels, compare them at the end of the chain, not at the start of it.

Here is the arithmetic, using made-up numbers so you can see the shape. Say you spend $600 on Channel A and it brings 40 leads, which is $15 a lead. Two of those leads become customers, so each customer cost you $300. Say you also spend $600 on Channel B and it brings only 12 leads, which is $50 a lead. But four of those become customers, so each customer cost you $150.

If you had only looked at cost per lead, Channel A would have looked like the obvious winner. Looked at by cost per customer, it is the more expensive of the two. Your own numbers will tell you which channel behaves which way. The point is that the ranking can flip depending on where you measure.

Why the cheap lead can be the expensive customer

Some leads are curious, some are comparing prices, and some are ready to buy this week. The channel a person came through often shapes which of those they are. So two channels can hand you the same number of leads and produce very different numbers of customers.

There is also the question of what those customers are worth. A customer who buys once and a customer who comes back every year are not the same to you, even if they cost the same to win. It is worth asking what happens after the first sale, and I come back to that in Sell to the Same Customer Twice.

And be honest about the small numbers. If a channel has produced three leads, you cannot say much about it yet. A pattern needs enough volume to be a pattern. Give a channel a fair run, keep the spend modest while you learn, and resist the urge to crown a winner after a handful of results.

How to compare them fairly

For each channel, gather the same four figures over the same stretch of time: what you spent, how many leads it produced, how many of those became customers, and what a typical customer is worth to you in gross profit. Then divide. Spend by leads gives cost per lead. Spend by customers gives cost per customer. Compare that last number to the gross profit on a customer, and you know whether the channel is paying its way. Cost per customer here counts only what you spent on marketing. Customer acquisition cost, or CAC, is the wider version: everything you spend on marketing and sales, your own time included, divided by the new customers.

The CPL vs CAC Workbook on the Resources page does this arithmetic for you, channel by channel. None of it works if you cannot tell where a lead came from, which is why How to Track Results comes first and why a simple CRM earns its keep so quickly.

This week

Pick the two channels you spend the most on. For the last 90 days, write down the spend, the leads and the customers from each. If you cannot fill in the customers column, that is your finding, and your first job is to start recording where each new customer came from. Then open the CPL vs CAC Workbook and enter what you have.

If your leads and sales are already written down somewhere, this takes an hour or two. If they are not, expect a few hours of digging through invoices, call logs and inboxes the first time, and a few minutes a week after that. The workbook is free.