How to Calculate Cost per Shown Appointment and Cost per Customer Acquired

Cost per lead tells you almost nothing. Here are the formulas that show what you really pay for a customer, with a worked example.

Many service businesses track marketing by cost per lead. It is easy to read and almost useless for decisions. A cheap lead that never becomes a customer is not cheap. An expensive lead that becomes a customer every second time might be a bargain.

To judge marketing properly you need to follow the money all the way to the customer. This guide shows how, step by step.

The funnel in five numbers

• Total spend: everything you paid to produce the results in the period, including media and fees.
• Leads: the enquiries you received.
• Booked appointments: the leads who chose a time.
• Shown appointments: the bookings who actually attended.
• Customers: the shown appointments who bought.

The formulas

• Cost per lead = total spend divided by leads.
• Cost per booked appointment = total spend divided by booked appointments.
• Cost per shown appointment = total spend divided by shown appointments.
• Show rate = shown appointments divided by booked appointments.
• Close rate = customers divided by shown appointments.
• Cost per customer = total spend divided by customers, which also equals cost per shown appointment divided by close rate.

A worked example

The numbers here are illustrative. Suppose you spend 6,000 dollars in a month and receive 120 leads, so your cost per lead is 50 dollars. Of those leads, 40 book an appointment. Of those 40, 24 show up, so your show rate is 60 percent. Your cost per shown appointment is 6,000 divided by 24, which is 250 dollars.

Now suppose 6 of the 24 shown appointments become customers. Your close rate is 25 percent, and your cost per customer is 6,000 divided by 6, which is 1,000 dollars. You can also reach the same number by dividing the 250 dollar cost per shown appointment by the 25 percent close rate.

What a shown appointment is worth

Cost only tells half the story. You also need the value on the other side. A simple way to estimate it is to multiply your average revenue per job by your close rate. If an average job brings 10,000 dollars and you close one in four shown appointments, each shown appointment is worth about 2,500 dollars in revenue.

To be more careful, multiply by your gross margin as well. At a 35 percent margin, that same shown appointment is worth about 875 dollars in gross profit. Compare that with the 250 dollar cost per shown appointment from the example above, and you can see how much room the business has.

Break even and what it tells you

Your break even cost per shown appointment is the gross profit that each one generates. If you pay less than that, every shown appointment adds profit on average. If you pay more, you are subsidising growth. Knowing the line lets you decide how hard to push.

Common mistakes that distort the numbers

• Counting booked appointments as if they were shown appointments.
• Leaving fees, tools or setup costs out of total spend.
• Blending several offers or channels into one average.
• Using too short a window, so late closes are missed.
• Ignoring time to close for jobs with long sales cycles.
• Treating revenue as profit and forgetting margin.

Where to improve first

The formulas also show you where a problem lives. A low booking rate points to follow up and qualification. A low show rate points to confirmations and reminders. A low close rate points to the sales conversation or the quality of the prospects. Improve the step with the biggest gap and the cost per customer moves.

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