What Is Customer Acquisition?

Customer acquisition is the process of identifying and targeting prospective buyers, nurturing them through the sales funnel, and converting them into paying customers. Ideally, a customer acquisition strategy is a systematic, ongoing effort that is regularly refined and updated in response to market changes and trends.

Why Do You Need a Customer Acquisition Strategy?

To remain viable and competitive, companies need to continuously fuel growth in two ways. First, they need to attract and convert new customers. Second, they need to persuade existing customers to spend more. Also, a well-developed and expertly executed customer acquisition strategy can preserve resources. As well as maximize ROI by targeting the right prospects and delivering the right message at the right time.

Core Elements of a Customer Acquisition Strategy

There is no template for developing the why, where, and how of a customer acquisition strategy. Although, the strategy should be tailored to fit the business and its target audience.

Integrating Business Strategy/Goals

What success looks like, and what metrics will be used to measure it, should be established at the outset. When setting business and campaign goals, company leaders should consider marketing’s historical impact on growth (the percentage of new revenues that can be traced back to marketing efforts) as well as industry benchmarks.

Customer churn should factor in as well. If churn is high and customer acquisition campaigns must make up for losses, it’s tough to drive growth. However, a customer retention strategy can ease some of the pressure. Allowing more reasonable and attainable customer acquisition goals.

Finding the Right Acquisition Channels

A customer acquisition strategy can be deployed on a variety of fronts. Some examples include SEO optimization, content marketing, affiliate marketing, digital advertising, and traditional advertising (print, TV, radio). Also, trade shows, direct mail, email, and/or social media campaigns.

The only way to know which channels offer the highest value is to test a variety of them and measure their relative performance and customer acquisition cost, or CAC (more on that below).

Stages of the Customer Acquisition Funnel

The customer acquisition funnel is wide at the top. Think of casting a large net to capture as much attention and interest as possible. And it narrows as lower-quality leads peel away and the brand guides remaining prospects toward a sale.

  • Awareness: New prospects and audiences are exposed to the brand for the first time by way of brand marketing efforts and/or independent research.
  • Interest: The brand distinguishes itself or its products by educating consumers and/or appealing to their emotions with a clever or resonant message.
  • Consideration: Once prospects visit the brand website, download content, register for a free trial, etc., they become more familiar (and hopefully more comfortable) with the brand and its products.
  • Intent: Prospects make their way further down the funnel and move closer to a purchase decision by watching product demos, adding items to their shopping cart, etc.
  • Evaluation: As the brand engages them further in response to their recent activity, prospects start to seriously consider the costs/benefits of completing the transaction, opting for a similar brand/product or simply doing nothing.
  • Purchase: Prospects become customers when they complete a transaction. Beyond the sale, companies can look for opportunities to cross-sell, upsell, and reward customer loyalty.

Tips for Creating a Successful Customer Acquisition Strategy

When it comes to mapping out a customer acquisition strategy, businesses have an almost overwhelming array of choices. Setting priorities can help ensure efficient marketing spend.

1. Ask the right questions upfront

The customer acquisition planning process should answer key questions such as:

    • Who is our ideal customer (target persona)?
    • What are our business goals (brand awareness, leads, conversions, revenue growth)?
    • Which channels will we use to generate interest and demand?
    • How will we measure campaign success?

Strategic planning is most effective when it involves multiple teams: leadership, marketing, product development, and sales, among others.

2. Optimize web content for organic search

Getting discovered online is a key component of a successful customer acquisition strategy. Refreshing old content (new links, updated info) and republishing it can significantly affect it’s ranking and boost website traffic. Determine which content is getting the most clicks and why (i.e., the industry-specific, feature-specific, or location-specific queries that led visitors to the page).

3. Prioritize social advertising and engagement

Social advertising offers unparalleled (and relatively low-cost) opportunities to drive brand awareness, engage prospects, and build brand communities. Social media users are unusually receptive to ads and campaigns, and marketers can target audiences and track ad/campaign performance in fine detail.

4. Include a variety of channels

Cross-pollination, or seeding ads across multiple channels, benefits companies in two ways. It ensures a single underperforming ad or channel doesn’t sink the overall customer acquisition effort, and it tends to deliver better results for marketers.

5. Invest in high-quality creative

No matter how well it’s planned, a customer acquisition strategy is only as effective as the quality of its creative assets. Images and videos that aren’t compelling enough to break through the clutter (or worse, reflect poorly on the brand) do nothing but drain resources. In recent years, high-quality creative has become more important than ever for social advertisers competing for new signups, downloads, and purchases. It has also become more affordable than ever, thanks to the introduction of tiered managed services.

6. Incorporate video whenever possible

More than 80% of businesses use video marketing to attract, inform, and entertain customers and prospects. Videos can tell brand and customer stories. They can also educate viewers by showing products in action and demonstrating their use. Videos can also elicit emotional responses and quickly go viral. The video should be a central feature of your social advertising campaigns.

7. Create optimized ads

Successful social advertisers systematically refresh and fine-tune their ad creative through the use of quantitative creative testing. This involves switching out various elements (ad copy, colors, CTAs, images, video length, etc.) of winning concepts and testing their effectiveness. Based on more than $1 billion in ad buys on Facebook, Instagram, and Google, we’ve found that it’s most cost-effective to create new variations of winning ads 80 percent of the time and devote the other 20 percent to developing entirely new concepts.

8. Leverage paid ads

Paid online advertising is a booming business—over $111 billion in 2018—and is projected to overtake traditional media ad spend in 2019. Search and social media ads are powerful traffic drivers, and they’re relatively low-cost means of acquiring new customers. Advertisers can either pay per impression (CPM) or pay per click (PPC), depending on their campaign budgets and priorities.

9. Partner with other brands

Co-branding has produced some amazing successes, from Bonne Bell’s Dr. Pepper Lip Smacker (introduced in 1975) to the Uber/Spotify “soundtrack for your ride” campaign. By making customer acquisition a joint effort, companies can pool resources and leverage each other’s influence and existing customer base to fill the sales funnel.

10. Consider a referral program

Asking customers to refer their friends, and offering discounts or other perks to both parties, is a relatively inexpensive tactic. It’s also highly effective. As young startups, Dropbox and Airbnb used referral programs to fuel multibillion-dollar growth.

11. Aim to be helpful and transparent

Keep brand messaging and product information simple and straightforward. Also, calls to action should offer a clear path and benefit. Finally, include social proof wherever possible, including media mentions, product ratings, and testimonials.

12. Focus on sustainability and flexibility

The resources you have in place to plan, execute, and adjust customer acquisition campaigns and strategies is key. Also, establish systems for content production, for example, to support ongoing inbound marketing efforts. In addition, be ready to switch gears and tactics in response to changing market conditions and consumer expectations.

What Is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) is the total cost of acquiring a new customer. CAC is calculated to determine ROI for all types of customer acquisition initiatives. These initiatives include traditional marketing and advertising to digital marketing campaigns to community events and trade shows. The lower the CAC for a customer acquisition channel/method, the higher its value for the business.

To calculate CAC for a select period of time, divide total marketing expenditures by the number of customers acquired. Here’s the equation in detail:

CAC = (MC + W + S + OS + OH) / CA

  • MC = marketing costs
  • W = wages for marketing/sales personnel
  • S = marketing/sales software
  • OS = outsourced services
  • OH = sales/marketing overhead
  • CA = number of customers acquired

To calculate CAC for a single initiative or campaign, the equation can be simplified (CAC = MC / CA).

To develop a customer acquisition budget (an “allowable CAC”), you’ll want to factor in customer lifetime value (LTV). A larger CAC can be justified and may be necessary, for customers who spend more over time.

An LTV: CAC ratio of 3:1 or better is ideal, but a ratio of 5:1 or higher suggests you might be investing too little in customer acquisition efforts and missing out on growth opportunities. To put the LTV: CAC ratio in context, you might also want to track related metrics such as monthly revenue growth, customer churn, and customer growth (number of customers acquired month over month).

How to Optimize Your Customer Acquisition Cost (CAC)

Optimizing for CAC doesn’t necessarily require major campaign overhauls. Here are some simpler tactics and tweaks that can bring customer acquisition costs down.

  • Optimize the path to conversion: Take a hard look at your website landing pages and CTAs. How well are they converting? Could concepts, layout, and/or copy be improved? Use A/B testing data to draw definitive conclusions and fine-tune your online presence.
  • Turn existing customers into brand ambassadors: Loyal customers are by far the greatest influence on their friends’ and family members’ brand perceptions and purchase decisions. Encourage and incentivize existing customers to promote the brand via social media channels. Ask them to share contests, coupons, giveaways, surveys, etc. within their own social networks.
  • Try something new: Even if a customer acquisition channel is performing well and your CAC is within an acceptable range, cost efficiency can always be improved. Try incorporating new methods and channels and be ready to shift your spending priorities based on how well they perform.

Avoid the High Cost of Going It Alone

A customer acquisition strategy that draws on in-depth social marketing expertise and world-class creative talent has the best chance of success. With these capabilities and strengths, companies can respond nimbly to changing consumer and industry trends while preserving resources and maximizing gains.

Want to know more about developing, executing, and scaling a customer acquisition strategy on a limited budget? Contact us today, and we’ll help you get started.

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