Well, well, well. Over the past five years, it seems like the cost of acquiring new customers has skyrocketed by a whopping 50%. Can you believe it? Marketing has become more expensive and customers are starting to lose faith in brands. But hey, let's not throw in the towel just yet, my friends. Companies shouldn't give up, they should just get smarter. After all, you've heard the saying, "Work smarter, not harder," haven't you?
Unfortunately, the first two statements are correct, but rest assured, the last one is completely incorrect. Companies should never give up; instead, they should strive to become smarter. (I'm sure you've heard the saying, "Work smarter, not harder," right?)
If you're searching for ways to enhance your customer acquisition, you're not alone. Reducing the costs associated with customer acquisition and demonstrating the ROI of marketing efforts are two of the most commonly mentioned marketing priorities among companies.
In this comprehensive guide, you will learn the fundamentals of customer acquisition, how to decrease the cost of acquiring new customers, and how to effectively capitalize on your loyal customer base. By the end, you will have the ability to develop an acquisition strategy that is so adaptable, that it will withstand the test of time and ever-evolving trends.
- What is Customer Acquisition?
- Customer Acquisition Cost (CAC)?
- Improving Your Customer Acquisition Strategy
- Methods of Acquiring Customers
- Customer Retention as an Acquisition Method
- Customer Lifetime Value (LTV)
What exactly is customer acquisition and why is it so important for businesses?
Customer acquisition refers to the process of attracting and converting new customers or clients to your business. It is an essential aspect of any business, regardless of its age or size, as it enables the business to generate revenue, cover costs, pay employees, and reinvest in growth. Additionally, customer acquisition serves as evidence of traction for external parties such as investors, partners, and influencers.
To understand customer acquisition better, it is helpful to visualize the customer journey using a funnel. The funnel represents the different stages in the buying process and the mindset of the prospect. As consumers progress through the funnel, they gain awareness of your brand, consider your product or service, and ultimately decide to become paying customers.
Lead generation occurs at the top of the funnel, where potential customers become aware of your brand. Lead acquisition takes place in the middle of the funnel, as prospects add your product or service to their consideration pool. Finally, lead conversion happens at the bottom of the funnel, where prospects decide to become paying customers. Customer acquisition encompasses the entire funnel, but for this guide, we will focus on lead generation and acquisition.
Measuring customer acquisition is crucial to assess the effectiveness and return on investment (ROI) of your marketing efforts. One key metric to calculate is the customer acquisition cost (CAC), which refers to the cost associated with acquiring a new customer. This includes marketing costs, event expenses, and advertising expenditures. To calculate CAC, divide the marketing costs by the number of customers acquired from a specific campaign or effort.
It is important to note that CAC should not be the sole metric used to evaluate marketing efforts. Other factors, such as the frequency of customer purchases and the timing of marketing investments, can influence the value and application of CAC. Nevertheless, calculating CAC is essential for understanding the cost-effectiveness of customer acquisition methods and continuously improving them.
If you want to minimize your customer acquisition cost, there are several strategies you can employ. First, focus on improving your website's conversion rate by optimizing calls-to-action, ensuring mobile and tablet responsiveness, and enhancing landing pages and copywriting. Additionally, consider ways to boost the value of your current customers, such as offering new products or upgrades and encouraging referrals. Finally, regularly review and optimize your customer acquisition strategy to identify areas where you can reduce marketing spend and explore new, cost-effective channels.
To improve your overall customer acquisition strategy, it should be sustainable, flexible, targeted, and diversified. A sustainable strategy ensures that your investments in acquiring new customers can be maintained for the long term, while a flexible approach adapts to changes in marketing and consumer behavior. Targeted strategies focus on reaching specific audiences, and diversified approaches involve using a variety of channels and methods to acquire customers.
By implementing these strategies and continuously measuring and improving your customer acquisition efforts, you can attract and convert new customers effectively, driving the growth and success of your business.
Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) is a buzzword you've probably heard before. It refers to the cost associated with attracting new customers or clients to your business through marketing, events, and advertising. Calculated for a specific campaign or timeframe, CAC is an important metric that assigns real value to your marketing efforts and allows you to measure your return on investment (ROI).
To calculate CAC, divide the marketing costs of a specific campaign by the number of customers acquired from that campaign. The formula is CAC = MC / CA, where CAC is the customer acquisition cost, MC is the marketing costs, and CA is the number of customer-acquired.
For a more accurate calculation of CAC, include all costs associated with marketing spend, such as campaign spending, marketing salaries, and even the cost of supplies used in creating contracts. The formula would then be CAC = (MC + W + S + OS + OH) / CA, where W is wages for marketing and sales, S is marketing and sales software, OS is outsourced services, and OH is overhead for marketing and sales.
While a simple CAC metric may apply to a single campaign, a more complex formula should be calculated within a specific timeframe, such as a month or fiscal year. For example, if a company spent $10,000 on customer acquisition in Q4 of 2017 and acquired 100 customers, the CAC would be $100.
It's important to note that CAC is not the only metric to evaluate marketing efforts as it can be influenced by factors such as the frequency of customer purchases and the timing of marketing investments. Despite this, CAC remains a critical number to calculate and constantly recalculate when acquiring new customers and employing new acquisition methods.
To minimize customer acquisition costs, there are several strategies you can implement. First, focus on improving your website conversion efforts by enhancing calls-to-action, ensuring mobile and tablet responsiveness, optimizing landing pages, and refining copywriting. A/B testing can also help determine the most effective design and copywriting approach.
Additionally, boosting the value of your current customers can lead to increased user value through referrals and promotion. Releasing new products or upgrades that customers can invest in can also contribute to this value.
Lastly, regularly adjust and optimize your customer acquisition strategy by analyzing the costs of each method and identifying areas where you can reduce marketing spend or manpower. Keep an eye out for newer and cheaper channels to invest in, as costs for specific channels can rise over time. This process ensures your strategy aligns with current marketing trends and remains agile.
By implementing these strategies, you can ensure that your customer acquisition methods are working as effectively as possible.
Customer Acquisition Strategy
Now that you understand the importance of having a well-rounded customer acquisition strategy, let's explore how you can improve yours. Whether you're a small business or a large corporation, acquiring new customers is essential for growth and success.
To begin, your customer acquisition strategy should be sustainable, flexible, targeted, and diversified. Sustainability is key because you want your investments in acquiring new customers to yield long-term results. For example, if you plan to attract customers through blogging, ensure that you have the necessary resources to consistently produce valuable content that will drive organic traffic for months or even years. This is why inbound marketing is so effective – it creates a sustainable flow of new customers. On the other hand, relying solely on ads can be risky because once the ads stop running, so does your customer acquisition.
Flexibility is also crucial in today's ever-changing marketing landscape. Salespeople used to be the primary source of information about products, but consumer trust has shifted towards recommendations from family and friends. With this in mind, it's important to have a customer acquisition strategy that can adapt to changing market trends. By staying flexible, you can ensure that your efforts are always aligned with what your audience wants and needs.
Another aspect to consider is targeting. Not all consumers are your ideal customers, so it's important to define your target audience before investing in any acquisition methods. This process will not only help you avoid wasting resources on irrelevant efforts but also reveal specific needs and desires that certain channels may fulfill. For example, if you're targeting millennials, incorporating video content into your strategy could be highly effective, given their high usage of platforms like YouTube.
Lastly, diversifying your customer acquisition strategy is key to reaching new audiences and generating more leads. Just like cross-pollination leads to stronger and more resilient plant species, diversifying your acquisition methods increases your chances of success. Research has shown that combining paid and organic SEO efforts can lead to higher click-through rates and increased profits compared to isolated efforts. Additionally, diversifying your strategy allows you to balance risk and reward. If one channel starts to decline in effectiveness, you can reallocate resources to a new, more promising method.
By following these guidelines and implementing a well-rounded customer acquisition strategy, you can expect to see real results. Now, let's dive into some specific methods you can use to acquire customers.
How to Acquire Customers
Customer acquisition methods can be categorized in various ways, such as paid and free, inbound and outbound, and so on. However, the most effective methods for your business will ultimately depend on your target audience, available resources, and overall strategy.
In the following sections, we will explore four commonly utilized methods for acquiring new customers, accompanied by some useful tools. These methods have been implemented by us, both on a small scale and on a much larger scale.
Using Content Marketing to Acquire Customers
Content marketing is a powerful strategy for acquiring customers across all industries and business types. By creating captivating and relevant content, you can capture your audience's attention and drive them to your website.
In a world where trust in advertising is waning, content marketing serves as an offering of expertise and authenticity. It says, "We love what we do, and we want to share our knowledge with you, free of charge."
When it comes to content marketing, there are endless possibilities for the type of content you can create. Here are some of the most popular options and the resources required to bring them to life.
Blog
If you decide to embark on the journey of starting a blog, it is essential to have the necessary resources in place to sustain it. Whether you choose to have dedicated employees, freelancers, or guest writers as your blog writers, it is important to ensure that your content is optimized for both search engines and reader experience. Having a graphic designer and editor on board can greatly contribute to achieving this goal. Additionally, the process of adding a blog to your website is relatively straightforward, depending on the hosting platform you use.
Don't forget to check out our featured resource, which provides six free blog post templates to help you get started on creating engaging and effective content for your blog. These templates can be a valuable tool for businesses of all sizes, industries, and audience types.
By investing in a blog, you open up a world of opportunities to explore different topics, showcase your industry knowledge, and establish authority among your readers. It also allows you to continually engage with your audience through various means, such as graphics they can save for later, questions they can answer in the comments section, or compelling call-to-actions they can click on.
So, what are you waiting for? Start your blogging journey today and reap the benefits of this highly recommended acquisition method!
Ebooks, Guides, and Other Content Offers
Ebooks, guides, and other exclusive content offers provide a unique approach to content marketing as they offer more in-depth and valuable information. While a blog post may focus on increasing email open rates with subject lines, a comprehensive guide would delve into the fundamentals of email marketing strategy. The latter option offers readers greater value and insight, which is why these types of content are often gated, requiring readers to provide their personal information in exchange for access. Content offers play a crucial role in customer acquisition and the conversion funnel, allowing you to generate more leads through your blog and content marketing strategy.
Creating content offers follows a similar process to blogging but may require more specialized resources. While blog posts usually involve a repetitive writing and design process, ebooks, guides, templates, whitepapers, and other downloadable content have their own unique purpose and production process. You can choose to create these resources in-house or outsource them, but keep in mind that they may require additional scrutiny and a distinctive promotional plan.
Featured Resource
Video
Video production can be a complex and costly endeavor, but with the availability of affordable high-quality cameras and a wide range of freelance professionals, creating videos has become more accessible than ever. When incorporating video into your content strategy, it's important to focus on the substance of the content rather than just the production quality, although the latter can certainly enhance the overall appeal. Producing a video typically involves various tasks such as script writing, editing, production, and animation, all of which can be outsourced to freelancers or production agencies. Keep in mind that video content tends to be the most expensive type of content, so it's advisable to reserve your best ideas for video projects. However, if you simply want to visually convey an idea to your audience, creating a Slideshare presentation can be a viable alternative to video.
At the core of content marketing is the objective of connecting with your audience and converting them into customers. Therefore, every piece of content you create should be relevant to your readers and include a clear call to action. Content marketing involves both content creation and content promotion, and it's essential to find the right balance between these two aspects. By combining effective customer acquisition methods with strategic promotion tactics, you can achieve better results in your content marketing efforts.
Featured Resource
Using Social Media to Acquire Customers
Social media marketing is comprised of two methods: organic and paid. Organic social media is most useful for boosting brand awareness, developing a company personality, and sharing content you’ve published elsewhere (like from your blog or videos). Consider it the gasoline for a fire you’ve already started using other acquisition methods.
Organic social media also capitalizes on the virality factor, inspiring your customers and followers to help you advertise (as we’ll discuss later on).
Some companies consider organic social media a waste of time (13% of marketers have reported that it’s the most overrated marketing tactic), and it can be if you don’t develop a solid game plan for its use.
- What networks are you going to leverage, and which ones are you going to avoid?
- What’s your social brand voice, and who on your marketing team will be tasked with developing and managing content?
- Do you have a crisis plan in place?
If these questions seem intimidating, don’t fret. Posting organically on social media may seem like shouting into a void, and with 2.3 billion active users, it can sure feel that way. The key is accessing the right networks — and this all comes back to a well-defined audience.
For example, if you’re targeting an audience mostly comprised of men, Pinterest would have little value for you as only 16% of men use Pinterest. If your audience is made up of millennials, you should include Facebook, Instagram, and Snapchat in your playbook.
Consider using social media management tools like Hootsuite or Buffer to help you curate and post content on your networks.
On the other hand, leveraging paid social media may be a better tactic for your business, depending on your budget and audience type. Paying for social media advertisements and exposure is a surefire way to get content in front of your audience, without having to build up a network of loyal followers. (But don’t get me wrong, that’s important, too!)
Whereas sponsored posts on Facebook, Twitter, or Instagram simply get your content in front of the right eyes, Facebook Lead Ads allow you to advertise on social media and gather customer information such as email addresses and names. This information can make the difference between a follower and a lead, so if your business is looking to build its list, this might be the acquisition method for you.
Featured Resource
Using Search Marketing to Acquire Customers
Just like social media, there are also two sides to the search marketing coin: organic and paid. Organic search marketing is also known as SEO or search engine optimization. SEO, like social media, complements content marketing efforts by optimizing your content so it’s more easily found by your target audience.
Think about it: When you Google something, you typically click on one of the first results (if not the very first result), right? The idea behind SEO is to create content that shows up high on the search engine results page (SERP) and makes searches want to click on your content.
SEO is far from an exact science, but there are some proven methods to help your content rank better. SEO best practices involve creating indexable content – content that search engines can read, decipher, and index within a SERP. You can increase your content’s “indexability” (no, I cannot say for certain if that’s a real word) by:
- Putting your main keyword in the post title
- Adding alt text to your images
- Uploading transcripts for video and audio content
- Linking internally within your site
There’s a lot that goes into SEO, but these are a few basics to get you started.
SEO is a popular customer acquisition method for a couple of reasons: It’s relatively easy, and it’s very cost-effective. SEO and organic growth have also been reported as the number one inbound marketing priority for companies around the world. Put in the time to learn SEO strategies, stay up to date with trends, and optimize your blog posts — and you’ll find your content ranking better than before.
On the other hand, paid search marketing (pay-per-click, or PPC) is advertising on a Google SERP itself. Instead of (or in addition to) organically optimizing your content, PPC allows you to create a search result and pay for it to show up alongside organic results, theoretically increasing your chances of being found by searchers.
Learn more about search marketing as a customer acquisition method and equip your content and ads to perform best in search engines by using tools like Google Keyword Planner, SEMRush, Open Site Explorer, and Ahrefs.
Featured Resource
Using Email Marketing to Acquire Customers
What do marketers do with all that customer information they collect through other customer acquisition methods? They build an email list, and they leverage that email list to connect with and convert their customers.
Email marketing might seem like an outdated acquisition method, but it’s a highly effective way to stay in front of your customers and promote quality content, product information, discounts, and events. Email is also a great way to simply connect with your audience, whether by sending a happy birthday email or a valuable promotional email.
But what you send isn’t the only important part of email marketing. It’s also helpful to keep an eye on list behavior. For example, when you get a new subscriber, it’s safe to assume that the consumer is interested in your company and wants to learn more. Certain link clicks in your email can alert you to what your subscribers are most interested in. Furthermore, people who unsubscribe altogether can give you insight into how your subscribers view your emails and the content you share.
Email marketing is one of the few ways to monitor consumer behavior without having to ask too many questions. It also provides a direct line into your consumer’s inbox (though it’s not guaranteed they’ll open your emails), unlike social media, search, or content marketing. Outside of direct sales, there’s no better acquisition tactic than email marketing that gets to the heart of the individual customer.
It’s clear to see how well these customer acquisition methods work together. For example, social media marketing can promote SEO-optimized content that includes a call-to-action to join an email list. That’s a little long-winded, but you get the gist.
Mixing up and experimenting with a variety of customer acquisition methods can also help you learn more about your audience and introduce new tactics to your current strategy. Regardless of which strategies you choose, always leave room for analysis, improvement, and change — because you never know when customers may stop responding to your methods, or leave altogether.
Featured Resource
Customer Retention Is the New Acquisition (Method)
Despite working hard and employing new methods to acquire new customers, sometimes they do leave us. *tear*
That’s the unfortunate motivation behind customer acquisition, though, and it’s important to recognize. On that note, let’s discuss another buzzword: Churn. Yuck … the word itself doesn’t sound too friendly, much less the definition behind it.
What Is Customer Churn?
Customer churn represents the percentage of customers that peel away from your business and opt out of your products or services. It’s also referred to as customer attrition or turnover.
Why is churn important?
Customer churn is what motivates businesses to find and acquire new customers. When you lose customers, you want to go out and find new ones, right? Historically, as businesses have experienced higher churn rates, they’ve invested in more (and more expensive) acquisition methods.
Well, my friends, it’s time to look at customer acquisition and customer churn in a new light. Instead of using acquisition methods to make up for customer churn, what if we worked to decrease churn altogether?
What if we avoided the proverbial (and pricey) band-aid of customer acquisition and went to the source of the wound — unhappy or unsatisfied customers? Those are, in fact, the customers that leave, er, churn, aren’t they?
What I’m saying here is that customer retention is the new customer acquisition. Instead of looking outward and onward for new customers to replace the old, forgotten ones, I propose that you look inward and work to retain customers using new and improved customer service methods.
Remember how I discussed the marketing funnel in the first section?
While the funnel is a handy visualization of how customers come to know and buy from your brand, it’s lacking in one thing: how your current (and past) customers fuel future customers. When your business circulates delighting and retaining customers, your marketing strategy starts to resemble a flywheel, not a funnel.
The term “flywheel” describes the momentum you gain when your company revolves around your customer, as illustrated above. See how the “service” portion of the flywheel links directly to “marketing”? That’s customer retention in action: working to retain your customers (instead of paying to replace lost ones) is an acquisition method in itself — and a cheaper one at that.
It’s a well-known fact that retaining customers costs much less than acquiring new ones. (It can cost up to 25X more to acquire a new customer than to retain an existing one.) But how can companies employ a retention strategy as solid and systematic as their customer acquisition one? Here’s how.
Customer Retention Strategies: Case Studies
A mere 5% increase in retention can increase company revenue by 25-95%. 90% of happy consumers are more likely to purchase again, and 93% are more likely to be repeat customers at companies with excellent customer service. These are just a few reasons to establish customer retention strategies — just like customer acquisition ones.
The customer retention strategies you put into action will vary based on your business model, audience, resources, and more. Here are a few examples of customer retention strategies that have worked for other companies.
Starbucks: Convenience
It’s hard to give something up when it’s available right at your fingertips. That’s what Starbucks marketers had in mind when they released their Mobile Order & Pay Feature within the Starbucks app. Customers can order from Starbucks wherever, whenever, and they don’t have to choose between time or taste.
TOMS: Altruism
By connecting a mission to its product offering, TOMS has effectively brought customers back for more — more shoes and more impact. TOMS has built brand loyalty by promising to donate one pair of shoes to an international child in need for every pair purchased. If you had the choice between two pairs of shoes, but purchasing one would go the extra mile, which would you choose?
REI: Exclusivity
Customer loyalty programs are a popular retention method among companies, but REI takes it a step further with its co-op membership. Not only does the membership offer unique discounts, pricing, and referral opportunities, but it also creates an elite community, the feeling of “Are you in, or are you out?” that reaches even the digital shoppers. I don’t know about you, but the guise of exclusivity would have me coming back for more.
HubSpot: Social Proof
We’ve discussed how consumers nowadays just don’t trust what businesses have to say about themselves. They’d rather listen to friends, family, and peers, and that’s why HubSpot lets our customers speak for us. Customer testimonials, reviews, and case studies speak a lot louder — and cost a lot less — than paid advertisements. They’re also better trusted by new and returning customers.
Turning Happy Customers Into Promoters
Regardless of how you plan to retain your customers, there’s one common denominator: providing an amazing customer experience. This is a nonnegotiable and means delivering on more than the basic customer expectations.
To turn your satisfied customers into promoters, you must aim for customer delight, not just retention. Customers who stick around because they genuinely want to can provide far greater value than increased revenue — they can act as your best marketers, too.
Here’s how you can empower your customers to promote your business and help you save time and money on other acquisition methods.
1. Ask for Customer Stories
Whether through case studies, interviews, reviews, or user-generated content, ask your customers to tell their own stories of how they came to discover your business and why they love it. Instead of boasting about your own company via paid advertising or social media, pass the microphone and let your customers do it for you.
2. Make Content Easily Shareable
In the last year, 77% of consumers shared positive experiences with their friends or on social media and review sites. While a happy sentiment can get the message across, wouldn’t it be even better if your customers were equipped to directly share content you’ve created, like social posts, blog posts, or graphics?
This is called the viral loop, and it’s when your customers share content that leads their followers back to your business. Create Click-to-Tweet links so that your customers can easily share social posts, and ensure each piece of published content has options to share via email or social media. The more convenient the promotion is for your customers, the more likely they’ll engage.
3. Inspire Referrals
Creating a referral program is a surefire way to bring in new business through your customers. Offering incentives — whether credit, physical gifts, or monetary rewards — is usually the best way to motivate a customer to share about your company (and compensate them in return). If you consider a customer referral valuable for your business, you must provide something equally valuable as a trade.
While a structured, incentive-based program typically works best for B2C companies, B2B companies might have better luck asking for direct referrals from their customers.
Whichever referral strategy you choose, be sure to provide value first and ask questions later. Give your customers a reason to want to refer you — because they’re so delighted by your business, they can’t help but share.
Let’s Talk About Customer Lifetime Value
In addition to knowing the cost of acquiring a new customer, it’s helpful to know how much value a retained customer provides your business. Both of these are important metrics to calculate and compare when reviewing marketing and sales efforts.
What Is Customer Lifetime Value (LTV)?
Customer lifetime value is the estimated net profit that an individual or business will provide over their lifetime as a paying customer.
Customer LTV is a helpful factor to consider when getting to know your customers and how they interact with your business. It also provides a clear valuation of your marketing and support efforts and helps influence business decisions across the board.
According to the Kleiner Perkins Internet Trends 2018 Report, the majority of 900 marketers and advertisers reported that customer LTV was the most important metric when considering advertising spending. Customers with high LTV are more expensive to acquire, but they provide the greatest value — in terms of revenue, feedback, and referrals than other customers.
Calculating customer LTV isn’t difficult, but it does require defining a few metrics along the way, such as average purchase value and frequency. Even if you have to estimate these numbers, having a solid customer LTV can help you predict how much revenue you can roughly expect a customer to provide throughout their relationship with your business.
By defining customer LTV alongside CAC, companies can figure out just how long it takes to replace each investment made in acquiring new customers — and how to better spend that acquisition budget.
Now it's your turn to take action
You've probably heard the saying, "Make new friends but keep the old. One is silver, and the other is gold." Well, the same principle applies to your customers.
Customer acquisition is vital for any company, regardless of its size. You can't afford to stop marketing to new customers, no matter the cost. However, research has shown that the real growth lies not with your marketing or sales team, but with your customer service team and, most importantly, your customers themselves.
Successful companies understand the importance of putting their customers in the spotlight, both for acquisition and retention purposes. By setting up your acquisition strategy correctly, you can not only reduce your customer acquisition cost but also increase the lifetime value of your customers.
Customer acquisition is all about acquiring the right customers who will stick around and help you acquire even more. Rather than viewing customer acquisition as a one-way funnel, start picturing it as a flywheel – constantly working to bring new customers on board while never forgetting about those who have already joined. Equip your customers to succeed, and they will become your best advocates, working on your behalf.
So, take the insights from this blog post and apply them to your own business. By focusing on both customer acquisition and retention, you'll create a powerful flywheel effect that drives sustainable growth and success.
