This is a guest post by Quincy Smith.
Acquiring customers has never been easy and modern businesses face more competition than ever to find, attract, and convert shoppers.
Both B2C and B2B companies are affected by rising acquisition costs and ProfitWell even put out a study stating that the cost of customer acquisition has grown by over 50% over the past 5 years.
The reasons behind this increase are varied but a big issue is customer sentiment and trust – there is so much noise out there that you really have to stand out to get traction.
While it’s easy to sit back and assume that a high CAC (the cost to acquire a customer) is just the cost of doing business, companies that have taken the time to develop a detailed customer acquisition strategy have seen their costs decrease while their sales grow.
In this post, we’ll examine what a solid customer acquisition strategy looks like and then explore 5 real-life companies that are doing it right.
What’s customer acquisition?
Customer acquisition is all about the process of creating a consistent flow of new customers to your business.
While this process almost always has costs associated with it, some methods are much more expensive than others.
A customer acquisition strategy is the act of managing the costs associated with gaining customers while identifying ways to optimize the process. When done correctly this strategy will become an essential part of your retail business plan.
Why is a customer acquisition strategy vital to a successful business?
1. Generates brand awareness
When done correctly, brand awareness can start to carry more and more of the customer acquisition burden. The best part is that it’s free so it can really drive down your CAC and even become a primary marketing channel that drives sales for next to nothing.
However, if you neglect to tie your brand’s story into your marketing efforts, you run the risk of letting your finances do all the heavy lifting as you leave a major sales lever unpulled.
2. Measuring success and scaling
Once you find a strategy that allows you to land new customers consistently, you can then test and scale your success across other channels.
In addition, a well-implemented strategy allows you to quickly measure and find out what you’re doing right (or wrong), and optimize your methods accordingly.
3. Keeps your acquisition costs down
Managing the cost of each new acquisition is just as important as finding ways to get new customers.
Having a strategy that not only allows you to test but also tracks the costs associated with each experiment is critical when it comes to managing a marketing budget. In the end, if you don’t know your CAC, you’re not going to be able to determine what’s working and what’s not.
Calculating your Customer Acquisition Cost
Your Customer Acquisition Cost refers to the price you have to pay to acquire a new customer or user. This price is derived from the marketing, sales, on-boarding, and any other costs that were incurred to land a new customer and is a big factor in determining the health of a business.
In almost every case, keeping this number as low as possible allows a business to stretch their budget while validating what’s working for their marketing.
To ensure that your Customer Acquisition Cost stays in line with your business goals, it’s essential that you keep are measuring your CAC regularly and tracking it by campaign instead of a single figure.
Let’s break it down the formula with an example:
CAC = Marketing Costs / Customers Acquired
Let’s say you spent a $2,000 on a Facebook ads campaign and you managed to acquire 100 new customers to walk into your store and buy your product.
By dividing $2,000 by 100 customers, you will arrive at an average CAC per customer at $20.
Here’s where it starts to get tricky.
While you may have spent $2,000 on Facebook ads, you’ll also need to factor other external costs that are indirectly related to your campaign, such as hiring a photographer to take photos for your ad, or a virtual assistant to handle incoming sales calls.
Assuming both the photographer and the assistant cost $500 each to hire, your true acquisition cost becomes $3,000, increasing your CAC to $30.
Remember, when you underestimate your actual CAC figure, you can end up overstretching your marketing budget.
Factors to consider when planning your Customer Acquisition Strategy
Every good customer acquisition strategy should focus on four key components: sustainability, flexibility, target audience, and diversity.
Customer acquisition strategies should strive to perform well over long periods of time and it’s important that you have the resources and skills to support them.
For example, if you’re about to pour a ton of money into Facebook ads but your social media manager is about to go on maternity leave, it’s probably worth waiting until you have the best chance for success.
Similarly, if you are convinced that a blog-driven inbound strategy is the right way to go but don’t have any way to convert the incoming traffic, it’s worth pressing pause on your publishing to put that piece in place.
You should also allow room for flexibility in your acquisition strategy as there is going to be a lot of testing and optimizing required to find something that works.
Using the Facebook ads example above, if you find a specific type of messaging or content works well with your audience then being able to allocate more resources will help immensely.
On the other hand, if your copywriter is tied up with another project and you can’t produce the content you need, it’s going to take a lot longer to gain traction.
3. Targeted Audience
Customer acquisition can lead to a massive drain on your resources if you’re not focussing on the right crowd.
Before making any decision on your acquisition campaigns, you need to make sure your targeted audience is clearly defined. By spending more effort in understanding the persona of your buyer, you can be much more laser focused on your acquisition efforts and weed out any unnecessary costs.
Don’t hesitate to spend money to test and understand this – it’s ok to allocate a small PPC budget to test audiences on Facebook or copy on Google. Simply track everything in your strategy doc and trust that what you spend now will decrease costs later on.
While diversifying should not be the goal of a new customer acquisition strategy (focus on finding what works first!), it can be beneficial when you have some data and a bit of success.
The idea is to achieve some omnipresence where your business or brand is targeting multiple places or channels where your customers hang out.
Diversifying used to be a pretty expensive endeavor for businesses, but thanks to the digital nature of advertising you can now follow a potential customer as they view your ad on Facebook, check out your newest release on your site, and eventually pop into their email inbox to remind them that you’re still there.
By diversifying your acquisition strategy across various blogs, social media platforms, Youtube channels, or even podcasts, you increase your chances of reaching new audiences and starting the coveted brand-awareness flywheel.
5 Examples of Successful Customer Acquisition Strategies
Create a Referral Program – Evernote
Evernote is a popular note-taking tool that allows users to collect, archive, and organize pictures, text, and documents for easy access.
To encourage existing users to introduce friends and family to Evernote, the company relies on a referral program that has been wildly successful in helping expand their user base to 11 million in just 2 years.
Users and their friends earn points for every referral and these points can then be redeemed for monthly Premium membership.
This referral program has not only helped Evernote gain more users but also expand their footprint against their competitors like Pocket and Pinterest.
Offer unique in-store experiences – Lush
Since their start in 1997, beauty brand Lush has grown from a small niche business into a global powerhouse thanks to their unique in-store experience for customers.
The brand places a strong emphasis on customer care and service by striving to build a friendly, memorable, and personal interaction with all their in-store shoppers.
Lush has also gone the extra mile to create a unique shopping experience for customers by modeling their store layout after a grocery store, thereby encourages shoppers to pick up, smell, and even try out their products right on the spot.
Tailoring the buying journey into a unique experiential process for your customers is a great way to boost both brand awareness and loyalty as customers seem to recreate the in-store experience again and again.
Use of live chat – Bravissimo
By allowing users the option to communicate using voice and video chat, UK lingerie retailer Bravissimo has changed the way customers get ready to buy.
While live chat has been around for years and is an undeniably helpful tool when it comes to converting customers, offering both video and voice creates a much more engaging and interactive experience for shoppers.
The use of video allows Bravissimo’s personalized service and personality to shine through and helped them bring down their cart abandonment rate to just 6.08%, well below the industry standard of 60-80%.
Build a community – Kettlebell Kings
Kettlebell Kings is an Australian based retailer that sells kettlebells and gym apparel worldwide.
When considering how to attract new customers, they opted against paid campaigns and instead turned towards Instagram where they could publish their own instructional content.
Their goal was to provide free educational content to help their followers get more out of their workouts – more than 100k subscribers later it’s clear that their strategy has paid off in spades.
At the same time, Kettlebell Kings also started encouraging their followers to share their own videos and created a flywheel of user-generated content that propels their brand awareness and engagement.
Thanks to Kettlebell Kings’s community building efforts, they managed to achieve a 7-figure growth within a few years.
Giving away free stuff – Floafers
Floafers is a Dallas-based fashion footwear retailer that specializes in EVA foam shoes.
To drive their brand awareness and customer growth, they created a viral giveaway contest for a free trip to Hawaii.
Floafers used several platforms including email, influencers, and paid ads to generate buzz and were able to increase their email list more than six fold, which resulted in an increase in their sales.
One more thing
Regardless of your marketing budget or the size of your business, there is always a strategy you can adapt to help you acquire new customers at an affordable cost.
For your business to achieve desired growth, you need to be deliberate in not only your plan, but also your execution of whatever strategy you decide to implement.
Our advice is to start by first identifying the appropriate marketing channel that fits into your customers’ buying journey, then test out at least one strategy extensively while tracking your CAC.
Once you have found a viable strategy, work to implement it for the long-term in pursuit of a steady flow of new customers while keeping your costs below your average customer value.
Quincy oversees content and SEO for Ampjar and is passionate about strong coffee, solo travel, and IPAs.