It’s a no-brainer that customers are the fuel that keeps a business going. The success of a business hugely depends on how many customers you can bring in and at what cost. Here’s where customer acquisition and customer acquisition strategies come into play and influence how a business successfully gains new customers.
What is customer acquisition?
Customer acquisition or client acquisition refers to everything a business does to get new customers. The goal of customer acquisition typically sits with the sales and marketing teams. Still, you can also acquire customers through initiatives run in collaboration with the customer support and customer success teams.
Customer acquisition is not always a one-and-done activity. It takes more than running a Facebook ad campaign or an email marketing blast to acquire customers. The duration of your customer acquisition process entirely depends on which stage of the buyer’s journey your prospects are in.
A prospective customer could be at any one of the following three stages of the buyer’s journey when they get introduced to your business:
Awareness: This is the first stage of the buyer’s journey in which leads – people who could be interested in your product/service – realize that they’re facing a challenge that your business solves and are gathering information about the problem as well as the solution.
Consideration: Here, leads become prospects (potential customers) who are more knowledgeable about their problems. Prospects actively scout for solutions and evaluate their options.
Decision: This last stage of the buyers’ journey where customers are ready to decide and are looking to purchase a product.
When you acquire a customer who started engaging with your brand right from the awareness stage, you need to guide them through the customer acquisition funnel. You can do this by continuously engaging with the customer, educating them, understanding their needs, and helping them see value in your product or service.
Now that you’ve understood what customer acquisition is, let’s figure out how you can quantify it and understand the return on investment of your acquisition efforts.
What is customer acquisition cost (CAC)?
Customer acquisition cost is a metric that gives you the average amount spent on acquiring a new customer.
You can calculate your CAC by adding up all the costs spent on customer acquisition activities and dividing that by the total number of new customers gained through those activities.
Your costs could include investment in marketing efforts, discounts, and salaries of the marketing team and sales team members.
The customer acquisition cost formula is: Total cost spent / Total new customers
Since this metric gives you a clear picture of the spending vs results, the lower the CAC, the better. That is, it’s ideal for getting more customers by spending less.
However, it’s only fair to assess how good or bad your customer acquisition cost is by comparing it with your industry’s benchmark CAC. This is because each sector has different operating procedures, sales cycles, buying frequency, etc. For instance, the average CAC in the retail industry is $7, while the average CAC in real estate is $213.
In case you just calculated your customer acquisition cost and are curious to know if your number is high or low, you can refer to the industry standards1 given below:
Travel: $7
Retail: $10
Consumer Goods: $22
Manufacturing: $83
Transportation: $98
Marketing Agency: $141
Financial: $175
Technology (Hardware): $182
Real Estate: $213
Banking/Insurance: $303
Telecom: $315
Technology (Software): $395.
Why should you calculate customer acquisition cost?
Customer acquisition belongs to important metrics such as customer retention and customer satisfaction that reflect critical aspects of a business. While the benefits of calculating customer acquisition costs are many, here are three high-level factors that you should consider:
Managing resources: Calculating your customer acquisition goes a long way in planning your budgets and resources for the coming year. It helps you understand how much you have and can spend to grow sustainably in the future.
Improving strategy: While the number of new customers gained defines the ultimate success of any customer acquisition strategy, you also need to assess the cost of acquiring those customers. If your spending is disproportionate to the number of customers you’re gaining, you may need to reconsider your customer acquisition strategy.
Informing investors: Customer acquisition cost as a business metric speaks powerfully about the scalability of your business. Investors use this metric to assess the long-term viability of a company by comparing the costs spent on acquiring a customer to the revenue generated by the potential customer.
If you’re wondering how to maintain an impressive CAC, you’re already thinking in the right direction. Let’s look at some lesser-known strategies that can help you lower your costs.
5 customer acquisition strategies that can help you lower your CAC
I mentioned above that you could acquire customers by spending 0$ or $100. We believe the best customer acquisition strategy helps you retain money in the bank. There are plenty of traditional marketing strategies for customer acquisition, such as content marketing, search engine optimization (SEO), and paid advertising.
However, we’ve picked and listed customer acquisition methods that are lesser-known, cost-effective, and driven by 1-1 conversations that build fruitful long-term customer relationships.
#1 Customer referral program
Developing a trusted network of customers promoting your business for the right reasons is an excellent customer acquisition strategy, without spending a single dollar on marketing to new audiences.
92% of consumers around the world now say they trust word-of-mouth or recommendations from friends and family, above all other forms of advertising.2 So it’s worthwhile asking to encourage reviews and referrals from your existing customers.
If you’re a B2C business, you can ask customers to refer their friends and family. And to incentivize this effort, you can reward your customers with discounts, freebies, or extended subscriptions.
If you’re a B2B business, customers with high NPS can be ideal points of contact who can spread the word about your business to other potential customers. If you’re new to the concept of NPS, this is a metric that helps you understand how likely your customers are to refer your business to their friends and family. You also open this up to your most loyal customers and make this a part of your loyalty program.
#2 Community engagement
Every industry today is teeming with user communities that enable customers to interact with one another and help each other. And these user communities can also serve as customer acquisition channels either through brand-managed conversations, or completely user-driven content.
Establishing yourself as a credible resource who helps users with the right resources and answers can have many benefits. The biggest benefits are:
– Building a presence in those communities and cultivating relationships
– Answering questions where you can organically plug in your brand
– Improving brand awareness
You can turn to your business’ user community forms to improve customer acquisition. For instance, HeadSpace, a leading online business in mindfulness and meditation, won over the teaching community by offering educators free access3 to their product. One way in which they got customers was by letting their current members know about their offer and encouraging them to “tell a teacher” about the offer. This helped them gain 25,000 new subscribers.4
#3 Social media monitoring
Social media is a robust platform that helps you stay in tune with your customers’ sentiments. Likewise, it’s an equally powerful tool that can help you tap into your prospective customers’ emotions.
Customers today take to social media to share happy experiences, but even more so to complain about poor/bad experiences. Some prospect of yours out there is cribbing about your competitor. If you’re not paying attention to their complaints, you’re losing out.
Unlike using social media marketing for lead generation, social media monitoring can help you organically discover conversations where your business can be a great fit.
Navigating through social media and finding the conversations that are relevant to you might be challenging. However, using a customer service software like Freshdesk, you effortlessly keep track of these conversations. You have to add keywords related to your industry and your competitors, and you’ll be able to track all conversations containing those keywords in a single view. You can even respond to those conversations right away.
#4 Proactive assistance
Sometimes, a prospective customer might be at the final stage of completing a purchase but might not be able to do so because of a technical issue. You cannot let go of a potential customer because of minor problems like these.
Here’s where proactive customer service becomes important. Proactive customer support is an approach to customer service that involves helping your customers resolve issues before they are escalated. You can start delivering proactive customer service by:
– Analyzing customer behavior to see where website bounces and churn occur.
– Interviewing your current customers, find out their pain points.
– Using information from your help desk to see where common issues arise and addressing them first.
With Freshdesk’s proactive help widget, you can identify common drop-off points and automatically offer help guides and FAQs. If you’re an e-commerce business, you can set up follow-ups on Freshdesk that are automatically triggered on abandoned carts.
Pro tip: You can even launch robust self-service options using Freshdesk to enable customers to find answers independently, should they ever get stuck.
#5 Increase customer value
Customer value is a metric that measures the net benefit your customers get from your product or service. It reflects the experience a customer has, right from discovering your brand to purchasing your product and using it. Improving it can lead to more brand value and customer loyalty.
We’ve gone over making a product or service that your customers love in detail already, so here’s a quick summary of what that looks like:
– Improve your customer experience by tailoring your marketing campaigns, offers, and content to segmented target audiences
– Document useful information to improve transparency
– Build strategies that are driven by customer feedback
– Reduce customer effort by offering omnichannel customer service
Bonus: Focus on customer retention
If you think your job is done once you acquire a customer, you’re wrong. We live in a world where every product or service has a dime a dozen alternatives. So it’s important that you acquire customers and successfully retain them.
Acquiring a new customer can cost five times more than retaining an existing customer.5
Customer retention is all about strengthening existing customer relationships and driving repeat business. Using a customer service software like Freshdesk, you can identify problems beforehand and create personalized experiences that customers love. Try Freshdesk for free to see how it can help you elevate your customer relationships.
Which customer acquisition strategy did you find most interesting? Let us know in the comments below!
Source:
1 – https://startuptalky.com/cac-by-industry/#Customer_Acquisition_Costs_by_Industry
2 – https://www.buyapowa.com/blog/92-of-consumers-trust-word-of-mouth/
3 – https://www.headspace.com/educators
4 – https://www.sheerid.com/blog/how-engaging-a-community-can-drive-customer-acquisition/
5 – https://www.outboundengine.com/blog/customer-retention-marketing-vs-customer-acquisition-marketing
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