In a previous post entitled “Calculating Your Customer Acquisition Cost: A Step-by-Step Guide to Understanding Your CAC”, I discussed how to go calculate a customer acquisition cost (CAC). In this blog post, I want to delve further into why having a customer acquisition strategy is critical to scaling a business.
A customer acquisition strategy is a plan of action designed to attract new customers to a business. It can be as simple as offering a discount to first-time customers, or as complex as a multi-channel marketing campaign. Whatever the approach, the goal is always the same: to drive more traffic to the business and convert those visitors into paying customers.
So why is having a customer acquisition strategy so important? The answer is simple: without one, the business will struggle to grow. Imagine having a business that sells products online. The company might have a great product, but if no one knows about it, there won’t make any sales. That’s why it’s essential to have a plan for how to attract new customers to the business.
One of the key benefits of having a customer acquisition strategy is that it helps focus company resources on the channels and tactics that will generate the best results for the business. Without a plan, the organization may end up spending a lot of time and money on marketing activities that don’t yield the desired results.
Another important benefit is that a customer acquisition strategy helps a business track and measure the success of its marketing efforts. This allows management to make informed decisions about what’s working and what’s not, and adjust their approach accordingly.
Finally, having a customer acquisition strategy helps make the most of the company marketing budget. With a plan in place, it can allocate its resources more effectively and ensure that it is getting the best return on the investment.
Understanding CAC puts marketing focus on customer acquisition strategies that yield the best ROI on their investment. Here are some thoughts:
- Paid advertising — The reason many e-commerce brands turn to Facebook, Google, and other platforms to run ads is that they provide extensive measurement tools that allow optimization of the ads and get the most out of a marketing budget. Although each paid advertising platform has its particularities, they mainly charge for user impressions, using a metric called CPMs (cost per one thousand impressions), and allow the marketer to target prospective customers based on demographics, interests and other traits. Almost every other social platform, marketplace, or search engine offers the option to buy ads, so deciding which one to use is a matter of understanding who the customer is and where they spend their time online. They also usually allow advertisers to choose who they want to target, based on demographics, interests, and other traits. By using these targeting parameters provided by an online advertising platform, a company can narrow in on prospective customers and acquire them through paid ads.
- Influencer sponsorships — The success of influencer marketing involves finding the right influencers to promote the product to their engaged and active followers. The challenge is identifying influencers with a creative ability to produce content that reflects well on the brand and an active, engaged following that would be interested in the company product offering.
- Email — Lead generation is often the first step to customer acquisition. Collecting email addresses is a great way to generate leads, as email marketing is one of the most effective ways to nurture leads and convert them into customers. There are many ways to build an email list, including driving paid traffic to a page with an email capture form or offering a welcome discount for new subscribers.
- Referral programs — Personal recommendations from friends and family members are one of the most influential forms of marketing. Setting up a referral program in which existing customers are rewarded for recruiting new customers can help leverage word-of-mouth referrals to acquire new customers. Research from Nielson has shown that word-of-mouth referrals are one of the most influential forms of marketing. People trust those they know, so when a friend tells them to check out a new product or brand, they listen. In order to use referrals as a new customer acquisition strategy, it is up to the business owner to make it easier for those loyal customers to recruit their friends. This can be achieved by setting up a referral program in which existing customers are rewarded each time they get someone new to purchase from the business. Apps like ReferralCandy, LoyaltyLion, and Smile.io all offer ways to encourage customers to refer friends through marketing emails, discounts, and incentives for both the customer and their new recruit.
- Traditional advertising — Traditional media, such as printed flyers, billboards, and TV ads, can be a great way to diversify a business’s customer acquisition channels and reach a new, targeted audience. However, the ubiquity of display ads, digital marketing efforts have become easier for consumers to ignore or opt out of through ad blockers.
- Search engine optimization — Keyword research and content strategy can help improve a website’s rankings on search engines, bringing in potential customers through search traffic. There are several ways to build an online audience on social media. Almost all of them require time, consistency and content to attract new followers and keep them engaged. Online following not only lends brand authority, it also creates an audience of customers that can be reached whenever the company wants to promote a new product or increase sales.
- Content marketing — Sharing reputable and useful information helps readers solve their problems. This builds trust between them and the business. If someone trusts someone, they are more likely to accept recommendations. Posts are full of useful, well-researched information and expert interviews that help readers make healthier life choices.
- Market testing — Continuously testing new prices, offers, and combinations of benefits and premiums can help sell more products/services at a better price. Measuring the results of these tests will help refine the customer acquisition strategy over time. Often the perfect time to do this is when quoting a price to a new customer. Increase the price and offer a new and unique bonus or special service for the customer. Measure the change in the volume of products/services sold and the total gross profit dollars generated.
It’s important to understand that not all strategies will work equally well for all businesses. The cost of acquiring a new customer (CAC) varies by industry, and businesses need to choose the marketing strategies that yield the best return on investment (ROI). The best strategy for a business will depend on the target audience, industry, and budget. But, by focusing on CAC and experimenting with different tactics, you can find what works best for your business. By focusing on the strategies that yield the best ROI, you can efficiently and effectively acquire new customers and grow your business. So, start experimenting with different tactics today and see what works best. If you want to grow your business and reach new customers, it’s time to start thinking about your customer acquisition strategy.
If you are planning to start a business or are thinking about scaling an existing one, be sure to read the ebook “Real-Time Strategic Business Planning: A Guide to Optimizing Your Business for Maximum Success”. It is an essential book for business owners, managers, and entrepreneurs looking to leverage real-time insight to improve their business operations. Learn how to develop a comprehensive business plan, assess risk and opportunity, and create an actionable roadmap for success.
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