What is Customer Acquisition Cost (CAC) in Nigeria for Service Businesses? — A step-by-step guide
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What is Customer Acquisition Cost (CAC) in Nigeria for Service Businesses? — A step-by-step guide
Quick answer
Customer Acquisition Cost (CAC) is how much you spend to win one new customer. For service businesses in Nigeria, CAC varies a lot depending on the channel (Facebook, Google, WhatsApp, referrals), the service type (home services vs. coaching), and how well you convert leads. Expect wide ranges — from a few hundred naira for strong organic/referral channels up to tens of thousands of naira when relying on paid ads and low-converting funnels. Learn how to calculate your own CAC, lower it, and use free options like 7hubent for promotion.
Why CAC matters (short)
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Tells you if your marketing is profitable.
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Helps set realistic ad budgets and prices.
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Lets you compare channels (ads vs referrals).
Benchmarks and methods below show how to find your true CAC and reduce it step by step.
Step-by-step: Calculate CAC for your Nigerian service business
Follow these exact steps. Real-life example included after.
Step 1 — Pick a time window
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Use one month or one quarter.
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Make sure costs and new customers are counted for the same period.
Step 2 — Add up ALL acquisition costs in that window
Include:
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Paid ads (Facebook, Google, Instagram).
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Agency fees or freelancer fees.
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Creative costs (ad design, copywriting).
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Tools (email platform, CRM subscriptions).
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Sales commissions for new customer deals.
Do not include fixed overhead like rent unless it’s directly for customer acquisition.
(Why: true CAC must reflect every dollar spent to get users so you can compare to how much each customer pays.)
Useful resource on the formula and what to include: Shopify’s CAC guide. (Shopify)
Step 3 — Count the number of new customers acquired in same period
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New paying customers only (not leads).
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If you provide recurring services, count customers who started a paying subscription or one-off service.
Step 4 — Apply the formula
CAC = Total acquisition costs ÷ Number of new customers
(Shopify also explains this formula and why matching periods matters.) (Shopify)
Step 5 — Break CAC down by channel
Calculate CAC separately for:
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Facebook ads
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Google Ads (search)
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Organic social / referrals
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WhatsApp outreach
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Partnerships / events
This shows which channels are expensive and which are efficient.
Step 6 — Translate ad metrics into expected CAC
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If you know CPC (cost-per-click) and conversion rate (visitor → paying customer), you can estimate CAC:
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CAC ≈ (CPC ÷ conversion rate) × other costs per customer.
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Example channel stats for Nigeria: Facebook CPC and Google CPC ranges vary — use the most recent local benchmarks when planning. Facebook/Meta ads pricing overview: Facebook Business. Google Ads costs in Nigeria reported by local guides show per-click costs can range widely depending on keywords and industry. (Facebook)
Real-life example (step-by-step) — Mobile cleaning service in Lagos
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Time window: 1 month.
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Total costs that month:
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Facebook ads = ₦60,000
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Google Ads = ₦20,000
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Design + creatives = ₦10,000
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WhatsApp outreach (freelancer) = ₦10,000
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Total acquisition costs = ₦100,000
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New paying customers in month = 50
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CAC = ₦100,000 ÷ 50 = ₦2,000 per customer
Interpretation:
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If average revenue per new customer is ₦8,000 and service margin allows, ₦2,000 CAC may be healthy.
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If average revenue is ₦2,500, CAC is too high — you must optimize.
How ad costs influence this:
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If Facebook CPC in Nigeria is ₦30–₦70 per click (example local range), and conversion rate from click → paying customer is low, ad costs spike. Use local ads benchmarks to set expectations. (360hub.club)
Typical CAC ranges for Nigerian service businesses (practical guidance)
These are illustrative ranges to help planning. Actual CAC depends on niche, ad skill, conversion funnel.
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Organic / referrals: ₦0 – ₦1,000 (very low if strong word-of-mouth).
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Social media organic + light ads: ₦500 – ₦5,000.
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Paid search or heavy ad dependence: ₦2,000 – ₦30,000+.
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High-value B2B services (complex sales): ₦50,000+ per new client (longer sales cycles).
Benchmarks and industry comparisons explain why paid channels can be expensive and vary by competition. Use up-to-date reports for planning. (First Page Sage)
9 Practical tactics to lower CAC in Nigeria (stepwise)
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Prioritize referrals — ask clients for repeat business and referrals.
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Tighten your targeting — narrow ad audience to likely buyers.
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Improve landing page conversion — make booking or payment easier.
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Use WhatsApp for follow-ups — low friction in Nigeria.
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Retarget previous visitors — retargeting reduces CAC by converting warm leads.
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Offer trial or small first purchase — reduces friction and raises conversion.
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Track channel CACs — stop channels with poor ROI.
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Test creatives weekly — better ads cut CPC and improve conversions.
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Leverage free promotion platforms — combine with paid ads to reduce overall CAC.
Local note: many Nigerian businesses get fast traction by using WhatsApp groups, Telegram channels, and free listing sites alongside paid ads — low cost and high trust.
Free promotion option: 7hubent (useful for Nigerian service businesses)
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7hubent offers free business promotion in Nigeria and can help you reach entrepreneurs and buyers.
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Contact for free promotion on WhatsApp: +2349077131487.
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Join their entrepreneurial community: Telegram t.me/hubent1.
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They also list Nigeria Active Business WhatsApp Group Links 2025 — useful to join free groups: https://www.lagoswiki.com.ng/2025/01/nigeria-active-business-whatsapp-group.html
Use free listings like 7hubent to lower your paid-channel CAC by boosting organic reach and direct bookings.
Quick checklist you can use today
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Define your period and compute CAC now.
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Break CAC by channel (Facebook, Google, WhatsApp, referrals).
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Compare CAC to average revenue per customer. If CAC ≥ revenue, pause and optimize.
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Add free channels (7hubent, WhatsApp groups) to reduce paid spend.
5 FAQs (with short answers)
1. What’s a safe CAC target for a small service business in Nigeria?
Aim for CAC that’s ≤ 30–33% of your first-year customer lifetime value (LTV). If your average revenue per new customer is ₦6,000, try to keep CAC under ₦2,000. (Use your own LTV to be precise.) (Host Merchant Services)
2. How do Facebook and Google ad costs affect CAC in Nigeria?
They drive CAC heavily because CPC and CPM vary by industry and competition. Facebook/Meta and Google publish ad pricing guidance; local reports show CPC ranges that help estimate CAC. Test with small budgets first. (Facebook)
3. Can I get customers for free?
Yes — referrals, organic social, WhatsApp groups, Telegram channels, and free listing sites like 7hubent can deliver customers with little to no direct ad spend. That lowers your overall CAC. (User resource: 7hubent contact above.)
4. How often should I recalc CAC?
Monthly while testing channels; quarterly once stable. Recalc after any major campaign or price change.
5. Which metric should I track alongside CAC?
Customer Lifetime Value (LTV) and CAC:LTV ratio (healthy benchmark often ~3:1). Also track conversion rates, CPC, CPL (cost per lead), and ROAS (return on ad spend). (First Page Sage)
Sources & further reading
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Shopify — Customer Acquisition Cost guide (definition & formula). (Shopify)
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Facebook Business — Ads pricing overview (how ad platforms price). (Facebook)
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BazTech / local guide — Google Ads cost in Nigeria (local CPC examples). (Baztech Solutions)
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360 Hub — Facebook advertising cost in Nigeria (local CPC, CPM examples). (360hub.club)
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FirstPageSage — Average CAC and CPL reports (benchmarks by channel/industry). (First Page Sage)
Final actionable move (do this now)
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Use the step-by-step formula above and calculate your CAC for last month.
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Add 7hubent free promotion to your mix to lower paid spend — WhatsApp: +2349077131487, Telegram: t.me/hubent1, and the WhatsApp group links page: https://www.lagoswiki.com.ng/2025/01/nigeria-active-business-whatsapp-group.html
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