Customer acquisition is the art of recognizing people interested in your products and services, convincing them to make purchases, and building their loyalty.
Businesses that develop a consistent, effective customer acquisition strategy achieve other goals, such as increasing brand awareness. Their strong reputation converts prospects into customers more quickly and easily. As that happens, these businesses see increased revenue as customers spend more often and on more expensive items.
This post will help you better define customer acquisition, identify the best channels to pursue it, calculate the costs involved, and learn tactics to continuously improve your approach.
What Is Customer Acquisition?
Here’s a simple way of thinking about customer acquisition: Acquiring a customer doesn’t just mean wrangling someone to buy products from your company. It’s about building a relationship that makes your customer want to become an ongoing member of your community.
This definition changes the traditional meaning of customer acquisition, which focuses on people’s transactions with a business. It’s an approach whereby you focus on the customer experience and the value it provides them. It’s a definition that recognizes acquisition doesn’t happen in a single moment but spans multiple stages of the customer journey.
Acquiring a customer could start by raising awareness among the right people about your brand and what you’re selling. Then, your marketing to educate and inspire them can play a critical role in the consideration phase, where prospects may compare features and pricing between your business and several others.
The decision stage of the customer journey includes the moment a customer chooses to pay. It can also involve the customer setting up an online account that provides your business with invaluable data about their needs and preferences. Plus, it encompasses the customer’s decision to leave a review or their likelihood to seek out your business the next time they make a similar purchase.
A solid customer acquisition strategy is directly related to your customer retention strategy, which keeps customers from churning and/or leaving for a competitor. If you do a good job of acquiring people with the right interests and meet their initial expectations, you’re in a better position to retain them.
What Are the Most Common Customer Acquisition Channels?
An acquisition channel is any avenue where a company can discover potential customers and learn about their wants and needs. Your strategy should include establishing a presence with these conversion tactics.
Word-of-mouth marketing: There’s nothing more convincing than being referred to a business by someone you know and trust, which is why word-of-mouth marketing can connect you with some of the most appropriate people in your target market.
Having positive word of mouth doesn’t have to be an accident or a fluke. You can increase the likelihood of your existing customers recommending you by asking. Send them a short form to share a testimonial for your website, social media channels, and newsletter. Ask them to leave a review on your website or a dedicated review site. When sales reps close deals, train them to ask new customers if they know any peers looking for your products and services.
SEO: Many sales begin with customers conducting online research, but internet searchers often don’t enter complete sentences in Google or Bing as though they were talking to a sales rep. Instead, they type keywords associated with a product category or terms reflecting their underlying needs.
Developing blog posts and other content that weaves the right keywords and keyword phrases into copy is known as search engine optimization (SEO). Crafting quality SEO content improves the chances your company’s website ranks at the top of search results when people are browsing online. Once they’re on your site, you can direct them to browse product pages or connect with a member of your team.
Content marketing: People don’t always want a hard sell. Instead, they may be attracted to blog posts, videos, a podcast, or other content that shows your company understands who they are and what they want. This approach, dubbed content marketing, can help acquire customers by providing valuable information that eventually leads them to consider your offerings.
Content marketing tactics could include creating a survey on a popular topic within your target market. You can take the results and turn it into a report, which people can download in exchange for providing their email addresses. You’ll capture leads who want to learn more about a topic and may eventually become customers.
Email marketing: When you have enough addresses in your database, you can use them to send out targeted, relevant information and offers that entice people to explore and purchase your products.
Consider sending an email immediately after someone visits your website with a discount encouraging them to return to add an item they were looking at to their shopping cart. Some businesses send out a series of email messages, called a drip campaign, that provides insight about a topic before inviting recipients to connect with a sales rep. Be mindful of the volume of messages people receive, and get creative with subject lines and body copy.
Organic and paid social media marketing: We all scroll through various feeds, including posts from branded accounts. Organic social media marketing means you create content for platforms like Instagram, TikTok, and Facebook, with the goal of driving people to become customers.
Paid social refers to running a campaign whereby the social platform amplifies your posts to targeted customer segments in some cases. Either way, social media is a powerful way to converse with customers and showcase your brand online.
Influencer marketing: A growing number of professional and casual content creators have developed advanced storytelling skills that resonate on social media platforms and YouTube. They’re called influencers because they tend to build large audiences that listen to what they have to say.
Influencer marketing can involve partnering with a creator and establishing a formal sponsorship (of a video or series of social posts, for instance), gifting them a product in exchange for a brand mention, or running an event together.
Paid advertising: Running banner ads, pop-up ads, and even out-of-home ads like billboards can be enough to compel people to learn more about your brand and make their first purchase.
You can create ad campaigns to acquire new customers, helping them understand more about what you do and why your products and services stand out.
Digital, hybrid, and in-person events: Brands can host gatherings where they provide a first look at new products and services, educate their audience about an issue that matters to them, or offer a skill-development workshop, among other ideas.
Even a small number of attendees who turn into paying customers can sometimes justify the effort of running an event. Thanks to technology, there are more options to run events than ever, such as in-person gatherings, video calls, or hybrid events, where portions or all the content is livestreamed.
Why Does Customer Acquisition Matter?
No business can afford to hope customers will just show up. Acquiring them directly contributes to the bottom line, which means you can cover operating costs, pay employees, and turn a profit.
When you acquire customers regularly, you gain an advantage over competitors. Adding more customers increases the activity happening across a brand, which in turn, builds greater awareness from other potential customers.
You also learn a lot as you acquire more customers, such as how to scale your operations to meet increased demand. Adding customers who have different needs tests your ability to adapt the experience you’re providing.
It’s critical to treat every customer as an individual and not just sell them but listen to them. Customers can provide insights that could be impossible to gather otherwise and will improve the way your business runs. As you respond to feedback, customers feel appreciated and become more loyal.
How Much Does Customer Acquisition Cost?
What are customer acquisition costs? Think of it this way: Every business has to invest in developing its products and services, setting up offices in some cases, and hiring employees. Acquiring customers comes with its own price tag, which can vary depending on how you approach it. This price is known as customer acquisition cost (CAC): the amount of money you spend on average to turn a member of your target market into a buyer.
Calculating CAC is important because if you spend more to get a new customer than you earn from their purchases, you’ll never be profitable.
Some businesses calculate CAC by dividing the amount they spend on marketing to prospects. This could be written out in this formula:
Marketing costs ÷ the number of customers acquired = CAC
You may need to factor in the cost of people involved in selling products, too, though, which would translate into this formula:
Marketing costs + sales costs ÷ the number of customers acquired = CAC
What if the customer not only buys once but also makes purchases over several years? As you get more granular with your data, you can calculate the lifetime value of a customer (LTV), and then create a ratio to calculate the CAC for these people. This formula could be represented as follows.
($) LTV / ($) CAC = (#) LTV to (1) CAC Ratio
However you calculate CAC, your goal should be keeping expenses as low as possible. Here’s how to do it.
Optimize targeting and segmentation: Your products and services aren’t right for everyone. Many businesses develop target personas, or representative examples of people who are most likely to need what you’re selling.
Align personas with data about your prospects, such as age, gender, marital status, annual income, and more. Then, create segments within your database that reflect prospects with a high propensity to become customers, and target your efforts and spending accordingly.
Balance organic and paid marketing strategies: Some customers will come your way naturally via referrals from existing buyers or will deliberately seek you out online. Others may only convert when approached in the right channel with the right message.
Using both organic and paid approaches maximizes your potential to get the biggest bang for your buck.
Customize retargeting campaigns: People move around a lot online. They may consider your ad briefly while browsing a web page but then forget to click through. Retargeting allows you to serve tailored messages to nurture a prospect who has shown some interest, which can effectively use your marketing dollars.
Implement referral programs: As mentioned earlier in this post, your existing customers are often a great source of ideas about who else will benefit from your products and services. Set up formal programs that incentivize customers (such as commissions) for proactively reaching out to their network and sending prospects your way.
6 Important Steps to Improve Your Customer Acquisition Strategy
Even if you don’t formally refer to it as such, you probably have some kind of customer acquisition strategy. Take stock of your current approach and explore some of the following ways to enhance it.
1. Set yourself up with the right tools.
Consider reviewing the tools your team uses to acquire customers and rate their effectiveness.
At the same time, connect with the team to review how acquiring customers is part of their existing workflows and to identify gaps. Use resources like Trailhead to help them develop their sales and marketing skills to convert more prospects. Ask about what other resources could help, and act upon what you hear.
2. Use those tools to their full potential
Some teams may think using a CRM requires a lot of manual effort. You may need to show them how CRM automation can streamline their workflows and accelerate customer acquisition tasks.
The best CRMs are infused with artificial intelligence (AI) capabilities that deepen their understanding of customer needs and predict what kind of experiences will turn prospects into buyers. With unified customer profiles, you can personalize sales and marketing efforts and scale your efforts across multiple channels at once.
3. Close the digital empathy gap
When you’re trying to acquire a customer in person, you can sometimes gauge by their eyes or facial expressions how they feel about a sales pitch. That type of insight gets lost on digital channels, but it’s just as important to listen and demonstrate you understand what customers feel at every stage of the purchase cycle.
Avoid the digital empathy gap by using technology to send alerts and notifications based on particular behaviours.
Are people dropping off the line if left on hold too long? Send text messages or emails that allow them to connect more readily. When responding on social media, use sentiment analysis to determine customers’ feelings, and craft responses that acknowledge when they’re hurt, frustrated, or confused.
4. Determine how you will measure customer acquisition
The number of customers you’re serving is always changing, and the effectiveness of your acquisition strategy can get lost unless you apply the proper metrics.
CAC is obviously core here, but many businesses also track the click-through rate when marketing across digital channels to see how many visitors become buyers. Order frequency can help show customer LTV, and average order size can provide depth to your CAC calculations. Shopping cart abandonment rates and other conversion metrics illustrate whether your customer acquisition approach works or needs tweaking.
5. Co-market with other like-minded brands
You don’t have to acquire customers solely on your own. Look within your ecosystem for businesses that sell accessories or items that complement your products, and consider a joint marketing campaign. You could hold an event with firms that operate within your industry but aren’t direct competitors.
Some companies work with resellers who can do some of the heavy lifting in customer acquisition. If you’re not producing your products, talk to the original manufacturer about a potential partnership to drive mutual success.
6. Keep relationships going
Just because you acquire a customer doesn’t mean they’ll be your customer over the long haul.
Follow up on sales with an e-mail or text message to gauge satisfaction with purchases, answer outstanding questions, or provide resources to help them make the most of what they bought.
Customers want to feel welcomed into a relationship where they are valued and supported beyond the moment they part with their money.
Take a Holistic Approach to Customer Acquisition
Some channels bring in more customers than others, but none should be ignored. The process of researching purchases and buying patterns changes over time. Think about how many people buy directly through online marketplaces and social media platforms compared to even a few years ago.
Besides being more intentional about customer acquisition, document your strategy and teach it to new hires. Offer a refresher session to longtime team members and seek their input on what’s working and what’s not.
Most importantly, lean on your CRM and other technologies to analyze and report on the results of your customer acquisition efforts. You’ll save time, boost employee morale, and attract more ideal customers to further business growth.
