Improve your customer acquisition.
Customer acquisition is art of adding new clients to your business. In other words, growth. Whether your business is brand new or established, the shifting sands of the marketplace mean that gaining new customers is an ongoing endeavour. Naturally, the financial success of your business depends on your ability to acquire customers.
It’s a simple enough concept, and yet the process of customer acquisition — especially in today’s digital world — is complex and multi-faceted. Allow us to demystify it.
The marketing funnel
To drill down a little deeper into the process of customer acquisition , let’s first take a look at the marketing funnel. The marketing funnel is one of the most well known marketing concepts around, and with good reason. It explains how people go from being members of your target audience (potential customers) to your actual customers.
As opposed to using a scattergun approach, the marketing funnel is a way of collecting your target audience and ushering them through a process that, when executed successfully, concludes with a purchase. There are various iterations of the funnel, but it’s commonly described as a four-stage journey of awareness, consideration, conversion and advocacy — or, a process where prospects become leads and then customers. At the final stage of the funnel, you have acquired a customer. But how do you get there?
Components of customer acquisition
In the days of the ancient marketplace, customer acquisition occurred by displaying their wares, calling out to passers-by, and spruiking the benefits of their products as they conversed with marketgoers.
These days, of course, things have become a little more sophisticated. There is now a plethora of options when it comes to promoting your products or services, and marketing in the digital age provides an exciting array of opportunities.
Some of the most common customer acquisition activities employed by modern day marketers are digital marketing services, such as:
- Social media (organic content and paid ads)
- Google Ads
- Search engine optimisation (SEO)
- Content marketing (including activities like blogs, e-books and videos as well as employing the services of influencers or ambassadors)
While marketers report that the greatest return on investment (ROI) comes from emails or eDMs* and Facebook ads, there is still a place for traditional methods of promotion such as print, radio and TV advertising, and research shows that consumers continue to place a high amount of trust in these forms of advertising.
Crafting a strategy for customer acquisition
As we always say here at PIER, all good strategy begins with research. This ensures that you’re targeting the right people in the right way and channeling your budget most effectively. When it comes to customer acquisition, the best strategy is one that thoughtfully employs a mix of activities rolled out across a variety of touch points.
You might work on your SEO so that potential customers can find you on search engines, for example, and then capture their email address by offering a discount when they subscribe to your emails or eDMs. From there, you might send them a welcome email offering some free content in the form of a blog, or suggesting certain products, which will hopefully take them from the awareness to the consideration to the conversion stage of the funnel.
Monitoring your metrics and activities and their success is also an important part of your strategy. It can be tricky to work out ROI when it comes to traditional advertising methods such as print or radio ads (marketers will often use tools like promo codes or URLs in an effort to track traffic from these sources), but the beauty of modern day marketing is that it provides a wealth of in-depth insights into ROI so you can track which of your efforts is paying off.
Facebook and Google ads are particularly helpful in showing you which of your ads are resonating with your audience, as well as serving you valuable information on the demographics of your audience. This helps you to become more specific in your targeting (even on different platforms). The other benefit is that digital methods are flexible and give you the ability to pivot and alter your efforts based on both market trends and what’s actually working.
In other words, a good customer acquisition strategy is one that is varied, targeted and flexible.
Customer acquisition cost
One of the most important factors in your strategy is working out how much each customer acquisition is costing you, so that you can plan and adapt accordingly. The cost of acquiring a new customer is referred to as Customer Acquisition Cost (CAC), and the CAC of various endeavours essentially tells you their ROI.
Of course, some digital platforms calculate this figure for you. But to calculate your CAC for each marketing activity yourself, you can divide the amount spent on the activity by the number of new customers acquired through that activity. Your goal should be to maintain at least a 3-to-1 customer acquisition cost.
An example of customer acquisition cost:
If you’ve spent $1,000 on the activity and it’s brought you 100 new customers, you would divide 1000 by 100 to find that the CAC is $10. You have paid $10 to acquire each customer. To go further, you could work out the average amount spent by each customer (eg. $20), multiply this by your gross margin (eg. 50 per cent) and then subtract the CAC (eg. $5) to calculate your profit (in this example, $5 per customer).
Your “spend” might include factors such as sales and marketing wages or salaries as well as outsourced services and software. Some activities are more difficult to track. The use of influencers, for example, can be tricky because it might be hard to quantify how many new customers you’ve actually acquired through their mention of your business (one solution is to provide the influencer with a unique discount code so you can track sales).
Whether your CAC is too high really depends on your business and goals. Some businesses are focused on securing lifetime customers and therefore accept that they might not make a profit off a customer’s first purchase. In some cases, your marketing activities may be part of a long-term strategy where the results are not necessarily seen straight away. However, if you’re consistently paying a high CAC for little reward then it might be time to adjust your strategy.
What comes after customer acquisition?
Once you’ve created a top-notch customer acquisition strategy? It’s time to focus on the all-important task of customer retention. In fact, many suggest that the marketing funnel should be represented in a more circular way (such as a flywheel) to acknowledge that the customer journey is ideally not a linear process, but a cyclical one that sees your customers become advocates and repeat customers.
Want to find out more?
Ultimately, customer acquisition is about creating a customer base or growing an existing one. The goal is to have a strategy for acquiring customers that evolves depending on the market and changes. To gain further insight into how you can bolster your customer acquisition, get in touch with PIER today.