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.
To remain viable and competitive, companies need to continuously fuel growth in two ways: attract and convert new customers, and persuade existing customers to spend more. Also, a well-developed and expertly executed customer acquisition strategy can preserve resources and maximize ROI by targeting the right prospects and delivering the right message at the right time.
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.
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 and allow for more reasonable and attainable customer acquisition goals.
A customer acquisition strategy can be deployed on a variety of fronts: SEO optimization, content marketing, affiliate marketing, digital advertising, traditional advertising (print, TV, radio), 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).
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 narrows as lower-quality leads peel away and the brand guides remaining prospects toward a sale.
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.
The customer acquisition planning process should answer key questions such as:
Strategic planning is most effective when it involves multiple teams: leadership, marketing, product development, and sales, among others.
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).
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.
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.
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.
More than 80% of businesses use video marketing to attract, inform, and entertain customers and prospects. Videos can tell brand and customer stories, and they can 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.
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.
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.
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.
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.
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.
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.
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, from 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
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).
Optimizing for CAC doesn’t necessarily require major campaign overhauls. Here are some simpler tactics and tweaks that can bring customer acquisition costs down.
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.