Seeking Help How to calculate Blended CAC with affiliate commisions?

[Lingopie]

?Hi ... quick question for everyone... how are you calculating CAC for your affiliate marketing campaigns were you have a revenue share? For the sake of calculating blended monthly CAC are you simply using a flat number to calculate the blended CAC. For example if in January you brought 10 subscribers via an affiliate channel that you are giving 30% of the revenue for each subscriber (which is $10 per month).

 

[T J Tutor]

Blended CAC by dividing the total costs involved to acquire the customer (marketing expenses, employee salaries etc) by the number of new customers acquired in a given period. This gives us a CAC metric that includes customers that were acquired through organic channels. The key distinction between blended and fully loaded CAC is that salaries and overhead costs are excluded from blended.

 

[Graybeard]

Customer Acquisition Cost (CAC) or ROMI return on marketing investments.

Without knowing a LV or CLV customer lifetime value and a margin you cannot proforma a "EBITA" (earnings before interest, taxes and amortization). Is that what you are trying to do when you say *revenue share*
You have to know or somehow estimate your churn (or attrition) rate also.

 

[Lingopie]

My question is more specifically around how to calculate CAC for affiliate conversions where the affiliate commission is actually a % of the sale price. In our case its a monthly subscription. So we charge $12 per month and the affiliate commission is $3 per month for each month that the user stays subscribed and does not cancel his subscription. That means the longer the subscriber stays subscribed the higher the total commission that we pay out. But for standard performance marketing, we know the CAC per subscriber because its the amount we spend on that channel per month / amount of subscribers. We cannot do this calculation for these types of subscribers who came from affiliate channels becuse the cost increases the longer the subscriber stays with us.

So when we are calculating our blended CAC accross all channels from Affiliate and performance channels we are simply estimating the cost at $30 but this is not correct because the cost to aquire an affiliate is not $30 because its variable. The question is how should we do this.

 

[T J Tutor]

the cost to aquire an affiliate is not $30 because its variable.

When using variables in any calculation, it must have the freedom to provide a solution on its own prior to becoming an absolute value, even if that absolute value exists for only one time, a few times, or anytime it is required to provide a value. Your calculation for the affiliate value must run its process independent of the primary CAC process before or during the primary CAC process. It's a simple process that most any database driven process or program can provide. Just simple coding that can be accomplished in most any programming language that provides interface to a database.

A programmer can easily build an independent process, or object, to integrate into your calculation process. They can even build a front end to it to allow for changing the variable inputs and calculations on the fly.

 

[Graybeard]

Affiliates are a fixed agreed expense.
Business costs of Affiliate acquisition are a business cost.
The two activities are not related.

affiliate referred gross sales / gross sales ?
SEM / gross sales
segment compensation ammt / gross sales =%
gross sales ammt/ segment compensation paid|*or earned =$
weighted costs

once you have a number you can find a median or average