Marketing is important for your sales and overall success. But as we advance in technology, marketing is becoming more expensive. Small and medium-sized businesses are finding it difficult to acquire new customers due to the high costs incurred. Implementing the right marketing strategies can help you increase your customer base and revenue. But, can this be achieved at a lower cost? Yes! In this guide, you will understand the process of Customer acquisition costs and how you can lower customer acquisition costs.
The importance of customer acquisition cannot be overemphasized. You'll be amazed to know that customer acquisition costs have increased by over 50% in the last five years. Remember, more customers imply more sales. As competition increases, companies and organizations are competing for both new and existing customers, e-commerce businesses are looking for ways to improve customer acquisition. Companies and e-commerce businesses consider customer acquisition costs as an important measure in evaluating the ROI of marketing efforts. If you know much value customers bring to your business, you can then build an acquisition strategy that will stand the test of time.
What Is Customer Acquisition?
Like every other marketing methods, there are costs incurred in the process of acquiring new customers. Therefore, understanding the customer acquisition costs will help you:
1. Gain awareness about your brand;
2. Introduce new products and services effortlessly;
3. Make money to pay employees and reinvest in growth.
Customer acquisition definition
Customer acquisition is the process of attracting new clients or customers to your business. The goal is to spend little on marketing to get more sales. Customer acquisition is important for an e-commerce business as it helps to ward off competition and keep the company growing.
What is customer acquisition cost?
Simply, customer acquisition cost is the money spent on getting new customers or clients to a business.
Customer acquisition cost formula
CAC = (Cost of sales expenses + Cost of marketing expenses)/New customers acquired
8 Best Ways to Lower Customer Acquisition Costs
Customer acquisition is an expensive process, and many companies have given up on the process. However, with the following tips, you can lower your customer acquisition costs.
1. Start utilizing marketing automation
Marketing automation software are tools used to improve lewd generation, email targeting, analysis and reporting, among others. It not only reduces human efforts but also reduce the customer acquisition cost since you're spending less. Utilizing marketing automation increases efficiency as the cost of setting up automation software is way less than the cost of an employee's effort in the same amount of time. So if you're not already using marketing automation, start using it now to save CAC.
2. Calculate customer acquisition cost accurately
To know whether or not your CAC is reasonable, you need to find out what the average CACs for your industry are. This will help you estimate whether you are spending too much on customer acquisition or not. Here's how to calculate customer acquisition costs. Your CAC is your total marketing and sales cost divided by your total number of newly acquired customers. Having similar results like that of your competitors means you'll earn a positive ROI.
3. Improve your conversion rate
Many companies spend money on advertisements without getting the desired conversion. Improving your ad campaigns will help you improve your conversion rates. How do you do that? Use both short-and long-tail keywords to boost visibility on search engines. Don't forget to add a call-to-action (CTA) so that your customers will know what to do after seeing your ads.
Video stands out to be one of the most engaging forms of marketing. Creating high-quality videos is easy, but can be expensive as well. So you want to produce the best video content that will attract your audience. From scriptwriting, production, content, editing, animation, etc. be sure to create something that visualizes your audience's interest so you can have a better ROI. You can also reduce your CAC by hiring freelancers to create quality videos for you.
5. Leverage content marketing
Customers love to read and learn more about what they are passionate about. By creating unique, relevant, and engaging content, you will easily draw your audience to your website. There is a plethora of content you can create that will help you acquire new customers. All you need is to know what your audience likes as well as their interest. This way, you get more customers with minimal effort.
6. Test your Ad copy
When running paid ads, you can improve your result by optimizing your ad copy. Take time to study the click-through rates to filter the ads that don't perform. Modify low-performing ads is imperative for reducing CAC in the long term.
Social media is a powerful tool for every business owner's disposal. Unfortunately, many e-commerce businesses are not fully utilizing it. Social media marketing is comprised of both organic and paid methods. Organic or free social media is most effective when you target a well-defined audience. Posting relevant content organically may not produce positive results in the short-term but don't fret; it is a surefire way to build up a network of loyal followers.
Depending on your budget, you can also push for paid social media or sponsored posts on Instagram, Twitter, or Facebook. What is essential is for you to know what network works best for your kind of business and which ones are to be avoided. You don't want to waste hundreds of dollars on Twitter when Instagram is the ideal network for your business.
8. Improve customer retention rates
Buyers will only be loyal to your business if they are satisfied with your service. As the popular proverb goes, a bird at hand is worth millions in the bush. Customer satisfaction is key to retaining buyers. The more customers you retain, the less you spend on customer acquisition. If you've been losing existing customers, start improving your customer retention rates. How can you improve the customer retention rate? By satisfying customers, delivering quality products or services, and attending to their queries 24/7.
Call to Action
Customer acquisition is all about acquiring not just new customers but the right customers that stick around. As a new business, always endeavor to bring new customers to your business. Once you bring them on board, don't forget to add values to their lives. This way, they will become online evangelists and acquire more customers on your behalf. If your average customer acquisition cost is high, these eight strategies will help you reduce customer acquisition costs and also improve your return on investment.
