- March 2, 2020
What is Customer Acquisition?
Before getting deep into the topic, you need to know what customer acquisition is. In simple words, customer acquisition is reaching and persuading prospective customers to buy from you in a measurable and repetitive manner.
This process is done under a few stages and it is called Customer Acquisition Funnel. There are 3 oftenly discussed stages.
Awareness: In this stage, you will target a large audience who may be interested in your products but without an intention to buy. Your goal is to create awareness and leads among them.
Consideration: After the top level of the funnel, next is the recognizing people with who already have taken a step towards buying. Which means, those who have signed up with your email list or following your social media. It’s up to you to convince them to buy.
Purchase: The bottom of the funnel represents the visitors who have shown a strong intent to buy. Such as adding products to cart or signing up for the free trial etc. Usually, in this stage, customers are offered incentives to encourage them to purchase.
Other than offering incentives, there are many possible and practical marketing tactics to reach new customers and convert them.
If your business has been around for a long time and has a consistent revenue, you may think there is nothing new to know about acquiring customers. But, you have to keep in mind that customer acquisition is timeless. Trends are being changed frequently and various kinds of channels are coming to the market. So, it is necessary to optimise your online store to survive in the competition.
To optimize your site with the intention to attract new customers, you need to calculate the Customer Acquisition Cost (CAC).
CAC is the total cost of sales and marketing efforts that are needed to acquire a customer or the cost of marketing divided by the number of new customers.
CAC= Marketing spend / No of new customers
For example, if you have spend 5000 LKR and have acquired 50 new customers,
CAC = 5000/50 = 100
So, CAC per customer is 100 LKR.
Calculating this helps you to decide whether the marketing approach is successful or not.
Assume that each customer spends an average of 500 LKR on their first purchase and the gross margin for each purchase is 50%. Then your profit for one purchase is,
Average Order Value (500) * Gross Margin(50%) – CAC(100) = 150 LKR
For businesses which have high customer lifetime value may sense that the CAC is not profitable for the first purchase. But if you can see those customers are likely to return, it is worth it and spend that much to acquire new customers.
However you can’t find the best approach to acquire customers in the first try. Experimenting different tactics and studying is the only way to find the best.
So, when it comes to Customer Acquisition Strategies, there are many things you can do but the following strategies are tried and true to be effective and successful.
1. Paid advertising
Paid advertising usually doesn’t require you to pay an upfront payment or minimum spends to access audiences. But to find the most effective method you need to test different approaches which may cost a little higher than expected. So, it’s better if you have the ability to invest in marketing to benefit long term. But you can be assured that it is worth it.
Facebook Ads and Google ads are the most commonly used platforms but, as there are many other platforms providing the service you have to decide the one to use based on your understanding of customer behavior.
Generally these paid advertising charges based on how many times an ad is seen. This is calculated using a metric called CPM (cost per one thousand impressions). You can narrow in on prospective customers based on targeting parameters such as demographics, interests etc.
This strategy allows you to increase revenue rapidly as long as you use right optimisation techniques. It is an advantage to have the ability to choose who your ads are shown to.
At the beginning you might be intimidated by the intricacies of the platforms. But with time, you can be at ease. However, this method is not for businesses with a low budget.
2. Partner up with influencers
One of the quickest methods is having influencers sponsoring for you. Influencers with a large number of followers can help with making awareness of your brand and the possibility of being customers is high. If you have a low budget and it is difficult to get in touch with that kind of influencer, you can go for an influencer with a small audience who have interest in your niche. Either way, you should have a better understanding about your product or service and what kind of audience you need to target.
Usually, you will be asked for an upfront payment. Since there is no guarantee that the influencer would be a help acquiring customers, you can negotiate with them wisely. You can offer a commission based payment or solidify a contract.
This method is more suitable for products that need demonstrations as the influencer can show them the procedure and results. If your product has a cool factor that can create a trend, this method will be successful.
3. Keeping an email list
Collecting information of potential customers will help to nurture the business in the long run. For sellers who have consumable products, this will be more advantageous. It is natural to not buy at the first visit. So, you can eventually convert them into customers by re-targeting them through email promotions.
Once the email is collected, you can automate the future email promotions. Such as sending promotional mails when a new product is introduced, seasonal offers etc.
An email list will help you to find look-alike audiences through advertising platforms like Google or Facebook.
But there is a small possibility for them to reach customers as much as you expected due to people blocking these services or them filtered by email services as spam. However, it is good practice to remove unengaged emails from your list. No use of keeping them right?
4. Using traditional ads
No matter how advance the technology is, people still prefer and trust traditional advertisements. So, trying them to promote your brand will not do any harm but help. The possibility to make awareness is higher in this way. Having to pay an upfront fee and not having methods to do a precise tracking might be pitfalls. But for local businesses this would be the best option.
The more traffic to your site means more potential customers and purchases. So, ranking high on search results is important. Implementing your content strategy is the main task here. You have to research keywords and think of words that can be used by people to find the products you sell. Then you should optimize your site based on them.
This takes a long time to take effect as there are thousands or more online stores. So the competition is high. But if you are willing to play the long game, this is a pretty good approach. You just have to keep in mind that the quality of content decides the results.
6. Launching a referral program
For businesses with an existing customer base, can get help from them to expand your customer base. Offer them a discount or special coupons for referring your store to others. After all, recommendations from family or friends are more reliable. So, this method definitely would be successful. The possibility of returning is high too.
But it’s only if your customers have a good impression of you. Only if your service can satisfy customers, this strategy will work. So, make sure your customer experience is good.
7. Creating an online audience
Creating a regular audience through social media can make it easy to promote, collect information, find look-alike audiences and interact with them. This requires time, consistency and also good content to attract people. You will gain a group of people you can reach whenever you want and it lends your brand authority. When you have a large following it provides social proof to others. So, that adds legitimacy to your brand.
Unlike paid ads, this doesn’t have a fixed price and the algorithms change frequently. So, if you plan for going for this option, you have to make sure you have enough finances.
For a business, the customer has the upper hand. Without them it is no use whether you have the best products or services. Do not neglect the things you have to gain new customers after you become somewhat successful. It takes time so, be patient, consistent and determined.
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