Boosting Business Growth: The Role of Customer Acquisition
One of the keys to long-term business success is customer acquisition. When companies attract and convert prospects, they expand their market reach and sustainably increase revenue. Developing new customer relationships is the cornerstone of all business growth.
The customer acquisition process definitely isn’t easy, however. First-time customers are much more difficult to attract and convert than existing customers. According to Zippia, new customers only make up 5% to 20% of total business sales. Without new customers, however, all business revenue eventually dries up, and by adding new customers, you’ll have an expanded customer base to nurture for future sales.
This article discusses several cost-effective customer acquisition techniques that are proven to grow your business and acquire those hard-to-find first-time customers.
What Is Customer Acquisition?
Before diving into different customer acquisition methods, it’s necessary to understand what the concept means. The primary objective of customer acquisition is developing a strategic and repeatable way to attract new customers. Many businesses hire customer acquisition specialists who devise these strategies and steer the direction of acquisition efforts.
While acquisition seeks to grow your number of customers, it’s not the same as marketing. Marketing focuses on making sure prospective customers see your content, while acquisition looks at whether or not target customers will take action (make a purchase) based on the marketing.
Customer acquisition may also be confused with lead generation, but these are separate aspects of the customer journey funnel. Lead generation occurs at the top when website visitors learn about the brand. Acquisition is the next step, consisting of the different tactics to attract and convert these leads into customers.
Your approach to customer acquisition will depend on the unique considerations for your business, but the general process includes three steps:
- Attracting leads
- Communicating with leads through marketing and other techniques until they are ready to purchase
- Converting leads into customers
In addition to these steps, Forbes outlines four stages essential to an effective customer acquisition strategy — vision, target, messaging, and profitability. The vision is your overarching goal in acquiring new customers, your target is the segment of your customer base you wish to increase, messaging is the method of communication used to reach these prospective customers, and profitability evaluates how much the strategy will boost revenue.
Understanding Target Customers and Market Segmentation
Many businesses start by considering their target market. The target market includes a collection of potential customers defined as ranges. For example, the target age range for your customers might be 45-54. The target customer is more specific. It represents the individual most likely to buy your products and may include a single age or income level instead of a range. It also includes their reasons for wanting to buy your products and services.
Establishing target markets and customers helps group similar prospects according to their needs and marketing preferences. This process is market segmentation.
Segmenting customers this way matters because the various types of consumers see distinct value in products and services. Your target customer also likely responds to certain forms of marketing more favorably than others. In other words, market segmentation can optimize marketing efforts by ensuring you focus only on the strategies that reap the best return on investment (ROI).
Leveraging Digital Marketing Channels
Once you determine your target customers for a product or service, you can begin developing your marketing plan. Multiple digital marketing channels are available, but the best for acquiring new customers will depend on the unique goals of the campaign. The following are some customer acquisition channels to consider:
- Content marketing
- Social media marketing
- Video marketing
- Email marketing
- Search engine marketing
When you settle on the best channels, you can strategize which techniques will help make the most of your acquisition efforts. For instance, you may focus on organic search, having your landing pages and blogs appear at the top of search engine results pages (SERP). To reach the top of SERP, you need to invest in search engine optimization (SEO). Another option is pay-per-click (PPC), where businesses pay search engines to have their web pages appear alongside organic results to increase the chances prospective customers find them.
Social media offers organic and paid search options, as well. Businesses can rely on organic placement to increase brand awareness or utilize paid placement through LinkedIn Ads, Google Ads, and Facebook Ads to ensure their marketing reaches their target audience even if their follower count is low.
No matter the channel or technique you choose, make sure to leverage your customer data and analytics to enhance your digital marketing campaigns. The following are just some aspects the insights from data can help improve:
- Measuring the success of a marketing strategy
- Personalizing content and messaging
- Tailoring campaigns to different customer segments
- Assessing marketing headlines and calls to action to determine which are most successful and which require some modification (A/B testing)
Referral Programs and Customer Advocacy
As mentioned, securing new business from existing customers is generally easier than from new customers. However, generating customer loyalty can also help with acquisition. When you consistently deliver an exceptional customer experience, people are not only more likely to return, but it encourages others to choose your company as well. Customers often refer family, friends, and colleagues to brands they like without prompting, but you can increase the impact of referrals through a customer advocacy program.
Because referrals act as marketing, they can prevent you from needing to invest as many resources in additional campaigns. Since they provide the potential for such great value, your company needs to deliver value in return. Offering incentives like discounts or access to exclusive benefits can motivate customers to participate in the program.
To collect referrals, consider providing customers with templates of questions about your business and why they should choose your products and services. These referrals become customer success stories that you can feature on your website. For B2B companies, creating separate landing pages with more extensive case studies can be beneficial, and B2C organizations may wish to draft customer spotlights to post on social media or blog pages.
Building Strategic Partnerships
Businesses may be reluctant to establish partnerships with other organizations, especially for customer acquisition. It may seem counterintuitive to collaborate with a company that offers similar products and services, as some prospective customers might prefer them over you. Instead of seeing these businesses as competition, consider the advantages of being their partners. Of course, not every partnership will help further your goals. You must thoroughly investigate opportunities before making a decision. The best partnerships are mutually beneficial and can help you realize the following:
- Access to target customers through new channels to expand reach
- Reduced customer acquisition costs through shared marketing efforts
- Added value for your customers that you couldn’t provide without the partnership
There are numerous ways to form a partnership; it doesn’t have to be a business-business relationship. For instance, if you want to grow your social media presence, reach out to an influencer whose audience aligns with yours. This technique can draw more eyes to your social media pages and help grow your follower count. Regardless of the types of partnerships you chase, the following strategies can help maximize your partner network:
- Choose complementary brands: Focusing on complementary brands can enable you to forge partnerships without selecting potential competitors. These are companies that sell different products and services but have the same audience.
- Provide perks for customers of well-known businesses: Your offerings may serve as the ideal add-on for the products and services a more well-known business in your space delivers. A partnership can direct more of their customers to your website when they seek these add-ons.
- Sponsor an event: This unique strategy can significantly boost visibility. If your business sponsors a big event like a music festival or sports game, more potential customers will recognize the branding when they search for your products and services. The best events to sponsor are those that appeal to your target customers.
Tracking and Measuring Customer Acquisition Efforts
Any business strategy requires tracking and measuring to gauge its success and determine areas for improvement. The main metric for customer acquisition efforts is the customer acquisition cost (CAC). CAC is the total cost of securing new customers and helps establish a real value for ROI.
Most businesses calculate CAC for a specific campaign or within a set period. To get a CAC ratio, use this formula:
CAC (customer acquisition cost) = MC (marketing costs) / CA (customers acquired)
Note that marketing costs include all expenses that contribute to the acquisition strategy. Examples include overhead costs, wages, outsourced services, and any SaaS applications purchased for marketing and sales teams.
Businesses can turn to data and analytics to develop additional metrics to assess customer acquisition. The following are two other key performance indicators (KPIs) useful for evaluating customer acquisition:
This calculation takes the number of conversions during a set window of time and divides them by the number of ads shown. It provides the percentage of people who followed the call to action defined in the marketing content.
Customer Lifetime Value
Customer lifetime value (LTV) refers to the estimated net profit a paying customer will provide a company long-term. Measuring LTV is very important during the customer acquisition phase because your should never pay more to acquire a new customer than that customer is worth to you long-term. If LTV is lower than customer acquisition cost (CAC), it’s very important for marketing teams to adjust their customer acquisition strategies. To calculate customer LTV, businesses must calculate other metrics first, including average purchase value and frequency.
Relationship Between Customer Acquisition and Retention
Increasing customer acquisition often goes hand-in-hand with boosting customer retention (reducing churn). As mentioned earlier, existing happy customers attract new customers through free word of mouth marketing, and they’re often willing to act as great references. The point isn’t that a retention strategy should replace your techniques of attracting and obtaining new customers, but rather that acquisition methods can also focus on building brand loyalty to improve retention.
The following are several ideas for enhancing customer retention:
- Deliver a personalized customer experience
- Maintain consistent and relevant communication with customers
- Build trust among customers by acting with integrity
- Educate customers about your business and offerings
- Establish a clear mission and vision that creates additional value
- Develop a system for customers to provide continuous feedback
- Regularly show gratitude for customers’ support of your business
Hone Your Customer Acquisition Strategy with Spider Impact
From small startups looking to boost brand awareness in the e-commerce space, to large corporations hoping to tap into new markets, businesses that wish to grow can’t ignore customer acquisition. As companies leverage different marketing tactics and channels to reach target customers, they can increase visibility and conversions.
If your business is struggling to transform leads into conversions, or it can’t seem to generate the interaction you desire from your target audience, a good place to start is by analyzing your current approach to customer acquisition. As you develop new strategies and tactics, consider using software from Spider Strategies to help measure your progress and guide your strategic decisions.
Our software — Spider Impact — helps businesses execute their strategic plans by breaking their big-picture strategy into manageable pieces. Compatible with any performance methodology, Spider Impact delivers features like dashboards and reports to help all team members get on the same page about your customer acquisition strategy.
Businesses across a wide range of industries rely on Spider Impact to help them manage strategic initiatives to drive better performance and ultimately experience growth. Contact us to learn more about our software, or book a live demo today.
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