Ever wonder why that boarding facility that opened this year is growing like a weed and think, "What are they doing that I'm not?" We've talked with hundreds of boarding and daycare facilities, and we've learned that the answer often comes down to one metric: cost of customer acquisition. Evaluating marketing strategies by understanding the true cost of acquiring a customer through different channels can mean the difference between just getting by and becoming a dominant player in your city.

Let's start with a definition so we're all on the same page. Customer acquisition cost can be calculated by dividing the amount of money spent on marketing by the total number of new customers gained during the period. If you spend $2000 a month and acquired 20 new customers, you would have spent an average of $100 per customer acquired. The real value of understanding customer acquisition costs comes from calculating the metric for each marketing channel separately to see how they stack up to one another. Let's compare a pet expo booth and a daily deal.

If you spend $500 on a booth at a local pet expo and have 10 new customers to show for the weekend, a quick calculation tells you that you spent $50 for each customer acquired from the show. The calculation should not stop there. The trick is to include the people costs, not just the external costs, associated with that marketing channel. In the booth scenario, once the booth space is purchased, it must be properly staffed. Two people at $12 an hour for an eight-hour show adds $192 to the bill. If you are running a giveaway or promo for the show, make sure to include those costs, too. For example, we'll assume you offer 20% off the first day's stay for a value of another $8 dollars. So for our booth example, the cost to acquire 10 customers was $77.20. Now that we have a good number for the cost to acquire a customer at a pet expo, we can make an apples-to-apples comparison to other marketing channels.

Let's compare that effort to a daily deal coupon, a channel that has been growing in popularity in recent years. The calculation is a bit different because there are no upfront charges. However, your boarding facility is agreeing to forgo quite a bit of revenue and then split the remainder with the daily deal site. Let's say you run a deal for $120 worth of services for a price of $60. Of that $60, you keep $30 and the other $30 goes to the deal site. Not every person who purchased the deal will be a new client. It's likely that many of your existing clients saw the deal and jumped at the chance to buy a 50% off coupon for services they knew they'd use anyways. Some daycares report that up to 30% of the clients attempting to redeem the deal were existing customers. For our example, let's use a conservative 10%.

Fortunately, not everyone who purchased the deal will redeem it. The daycare businesses we spoke with sold anywhere between 50 and 350 coupons during their promotions. Assuming you sell 200 coupons through the deal, but only 180 people redeem it, you'll get $600 from this deal without actually providing services. Before taking staffing costs into account, you've spent $97.50 to acquire each customer. So far the numbers are as follows: $16,200 in forgone revenue minus the $600 from the coupons that will not be redeemed is $15600 in total forgone revenue. Divide this number by 160 (the number of new customers) to get $97.50. Now we need to calculate the people costs.

If you sell lots of coupons, you'll get a larger than average number of folks coming in the door this month cashing in their deals. Some, but not all, will turn into long-term clients. Can your daycare handle an influx of 160 new customers in the course of the couple of months - and still deliver a service that you are proud of - without extra staff hours? If you don't impress these customers on their first visit, you're less likely to convert them into long-term clients, and the investment of time and money is lost. Either way, you're in for some higher staffing costs to service the influx.

Wow, that's a lot. Ready for the numbers? We spoke with several boarding facilities that ran daily deals. Some ran expirations out over two months while others had six-month expiration dates. That's a wide spectrum. Assuming an average number on both counts, you'll need one part-time dog handler to take care of all the new dogs and one part-time front desk clerk to answer calls and check in new clients. Assuming one dog handler makes $12 per hour and a front desk clerk makes $8 an hour, that'll add $6,880 to the bill. Divide that by the number of new customers, and you get $43 in staffing costs per new customer. The total costs of running the daily deal are $140.50 per customer.

We've made a lot of assumptions here, and your mileage will vary. Change the numbers and the daily deal could have come out ahead. Under our set of examples, it's easy to see how the pet expo booth delivered lower cost customers than the daily deal. Given the choice between spending more time and resources on running more daily deals or more pet expos, you'd choose the pet expo, because pet expo customers are costing you almost half as much to acquire as the daily deal customers.

How do your marketing channels stack up? What promotions do you run on a regular basis? Track how your customers find you so that you can use the framework to understand which marketing channels work better than others. Double down on the ones that perform the best. Fire the channels that aren't. Do this and watch how much more quickly you meet your business goals.

Nicole Dimetman is the founder and CEO of Embarkly, the online marketplace that lets pet parents search, compare, and reserve pet care. Embarkly allows pet care facilities to take reservations 24/7, paying only for the customers who use their services and getting more clients for less time and money. Visit getlisted.embarkly.com, or contact Nicole by phone at (512) 799-7729 or by email at [email protected]. Nicole also runs the Pet Boarding and Daycare Industry Network on LinkedIn and would love for you to join in the conversation.

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