Blog / The Layman’s Guide to Customer Acquisition

Customer acquisition is essential to the health of every company. If acquisition processes aren’t successful, a company will fail. Customers fuel revenues and keep companies in business. As a result, many businesses closely oversee their customer journeys to identify gaps and improve relationships. 


What Is Customer Acquisition?


Customer acquisition is the process companies use to bring new clients or customers to the business. Simply put, customer acquisition boils down to convincing people to purchase products or services. The methods companies use to acquire and keep customers are vital to success because every business must gain new customers to keep its operations up and running smoothly. 


Converting prospects into customers can be extremely time-consuming, difficult, and costly. Smart businesses are continuously searching for methods to improve their customer acquisition strategy and lower costs.  As acquisition strategies are constantly evolving, your business must have flexible processes in place to pivot as consumer demand fluctuates. 


Acquiring new customers involves a variety of sales tactics that evolve as companies grow and change. Having a sound strategy in place will allow your organization to meet profit goals, pay employees, and invest in growth and development. Some common customer acquisition strategies include:


  1. Defining an ideal buyer: You can’t attract the right audiences if you don’t have a defined target audience. After you’ve defined your ideal target buyers, you’ll be better equipped to focus your customer acquisition efforts primarily on them and avoid casting too wide of a net and wasting precious advertising budget. 
  2. Identifying the right acquisition channels: Once you’ve defined your ideal target audiences, you must also determine the best methods to reach and engage with decision-makers. Conduct research to see where they consume media and how they prefer to be sold to. 
  3. Solidifying the human connection: Driving real connections with prospects solidifies deals and transforms customers into loyal fans and brand advocates. Build solid relationships with prospects and customers by prioritizing face-to-face sales and personalization tactics. 
  4. Increasing prospect engagement: Increase the engagement rates of potential customers on digital channels including email, social media, and website content.
  5. Investing in a sales outsourcing partner: If you’re looking to scale quickly, outsourcing your sales function to a trusted third-party sales team can boost lead generation efforts and drive growth. It will also give you the flexibility to increase or decrease your sales investment based on generated campaign performance. 


What Is Customer Acquisition Cost?


Customer acquisition cost, also known as CAC, is the accumulation of associated costs while convincing a customer to purchase a product or service. Advertising, marketing, and research and development costs are all included in a business’s CAC. Over the last five years, customer acquisition costs have risen by more than 50%. As such, many organizations are looking for new and innovative ways to lower their expenses and close new business. 


CAC is often calculated by campaign or time period (month, quarter, year). Determining the CAC is important because it measures the ROI of specific campaigns and attaches value to marketing and sales efforts. 


How is Customer Acquisition Cost Calculated?


Customer acquisition cost is calculated by adding the marketing and sales costs connected to a specific campaign and dividing that by the number of customers acquired from that campaign. 


The basic CAC formula is MC + SC / AC = CAC, where:


  • MC is marketing costs
  • SC is sales costs
  • AC is acquired customers 
  • CAC is customer acquisition cost


For example, if a company spends $600K on sales and marketing, and acquired 600 new customers, their customer acquisition cost would be $1K. Acquisition costs should never exceed the customer’s lifetime value. If they do, or you’re looking for a few strategies to lower your CAC, here are a few tips: 


Focus on Customer Retention 


No matter how hard you work, customers will always leave. It’s just a fact of life, akin to paying taxes. However, just a 5% increase in customer retention rates can boost profits by 25-95%. 

Additionally, it’s cheaper to retain a current customer than it is to gain a new one so it’s important to prioritize strategies that keep churn rates low. Here are strategies that boost customer retention rates:


  • Constructing robust customer education and training programs
  • Engaging customers through personalized emails and direct mail campaigns
  • Employing customer success teams to aid with onboarding and training initiatives
  • Offering discounts or incentive programs for loyal customers 
  • Utilizing customer satisfaction surveys and adjusting processes based on feedback


Build Customer Trust


The ways consumers interact with businesses have rapidly changed over the past 20 years. We’re less likely to trust salespeople and more likely to feel we’re being lied to. In fact, according to HubSpot’s 2018 Research Trust Survey:


  • 55% of people surveyed didn’t trust the companies they purchase from as much as they did in the past
  • 69% of consumers didn’t believe advertisements are truthful
  • And 71% didn’t think sponsored ads on their social networks were credible.


Nowadays, people are more likely to seek purchasing advice from friends, coworkers, family, and third-party review websites, like Yelp and Glassdoor, before purchasing. Improving customer trust will increase the likelihood of word of mouth promotion. You can improve trust by:


  • Building customer onboarding programs
  • Never overpromising what you can’t deliver on
  • Personalizing your customer messaging  
  • Being transparent when necessary 


Increase Customer Lifetime Value (CLV)


CLV is the total value of a customer over a specific period of time. For example, if the average CLV of a sporting goods shop is $200 but it costs more than $300 in advertising, marketing, and sales costs to bring on a new customer, the shop will lose money. Remember, most often it is more cost-effective to keep a current customer than it is to acquire a new one. Increasing the value of existing customers is an excellent growth strategy. The key to success is understanding why customers purchase or fail to purchase your product or service. 


Unfortunately, there isn’t a switch you can simply turn on to guarantee your sales pipeline is always flowing with quality leads. However, with the right processes in place, you can be nimble and move quickly to attain recurring customers. 

What are your best customer acquisition strategies? Let us know in the comments below. 

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