Mark Zuckerberg famously said “Move fast and break things”, which might be useful advice in many situations, but it may not be the best advice when it comes to customer acquisition. The decision to take your product to market and begin onboarding customers should be given the weight it deserves. The execution of your user acquisition strategy must be thought out very carefully.

The customer acquisition process is far from an exact science. Many things can (and do) go wrong, explains Paul Graham, one of Y Combinator’s founding partners. However, there are some things that you can do to mitigate risk and improve your chances of success. 

What Is Customer Acquisition Cost?

Customer acquisition cost (CAC) is the amount you spend to acquire each new customer.

The costs can vary widely based on the types of channels and programs you’re running (e.g. online ads or event marketing). To most accurately calculate your costs across programs, it’s a good idea to include every expense involved in generating new customers, such as all marketing & sales costs, salaries, and any overhead or outsourcing costs. Our article the Ecommerce Guide To Acquiring New Customers is pertinent. For a sustainable and profitable business, you’ll want to ensure your CAC is lower than your customer’s lifetime value.

Customer lifetime value (LTV) determines how much profit each customer brings in over the entire duration of their relationship with your business. This is why it’s so crucial to know how much you’re spending per customer – in other words, ensure the dollars you’re bringing in are greater than the dollars that are going out. And with both CAC and LTV, you’ll be able to calculate your Return on Investment (ROI).

How To Calculate Your CAC

The basic formula to determine your Customer Acquisition Costs over some time is:

Customer Acquisition Costs = Total costs / Total number of customers acquired

How To Leverage Your Customer Acquisition Cost Data

The simplest method many marketers resort to is using spreadsheets to manually aggregate data and compare CAC, revenue, LTV, and ROI across channels. We found ourselves in the same painful weekly exercise pickle as our customers, in copy-pasting ads spend, conversions, and more from every ads channel (as none of them have the same template) into a Google Sheets template

How To Improve Your Customer Acquisition Cost

When it comes to reducing your CAC across your marketing efforts, there are a variety of tactics you can implement, based on your channels and the purchase flow. Ensure your website is mobile-optimised.

As a general rule of thumb, ensure you analyze, test, and optimize every part of your acquisition flow and customer lifecycle. Below are 4 tips to cover a broad range of categories:

Measure ROI with marketing attribution

• As a foundational step, using marketing attribution is key for monitoring your CAC and ROI across any paid or organic channel, and getting clear insights into which ones convert best.
• Tools to use: Smart Attribution

Optimise website conversion rates

• Monitor your visitor-to-conversion rates, and ensure your website is simple to understand, easy for people to sign up, and mobile-optimised. It’s a good idea to test different copies, CTA buttons, and designs.
• Tools to use: HotJar lets you track visitors with heat maps, and FullStory, which shows you video snippets of how people use your product and where they struggle. You can also make it easy for prospects to get in touch with you and convert more quickly with customer chat solutions like Intercom and Drift.

Upsell existing customers

• One of the best ways to unlock more customer happiness and LTV is by upselling customers with features they need. For many businesses, 90% of revenue comes from upselling and on the E-commerce end, Amazon sees 35% of sales come from upselling. It’s most helpful to hear pain points from customers directly, and then build solutions.
• Tools to use: Intercom and Drift are great ways to notify and onboard new or existing customers and promote new features. You can also use form-building tools like JotForm and Typeform to get scaled insights from customers before building a new product.

Shorten sales cycles

• Creating customer lifecycle campaigns is key for engaging, converting, and retaining customers. Using a CRM platform lets you track all your leads and customers and keep sales cycles short. An autonomous hyper-personalisation solution also lets you set up email campaigns, nurture leads and customers, and upsell them, with the highest ROI for the least investment.
• Tools to use: Our SMB customers prefer CRM tools like HubSpot, and then migrate to Salesforce once they’ve grown. 

You should also include outbound marketing. If advertising has proven to be successful in your industry, then here are some options that will help drive traffic to your landing page.

AdWords: AdWords allows you to choose between display ads and search ads. Display ads often are referred to as banner ads. They’re graphical and are among the most popular types of ads. They’ll appear on relevant websites. Search ads are what you see beside your Google search results. You can bid based on search keywords. Both of these are incredibly popular and can be quite successful if you can maintain a good quality score and have a strategic keyword plan. Use the Google Keyword Planner to help you find quality keywords.

Facebook Ads: Facebook Ads can be used to promote your Facebook page, of course. But they also can be used to promote landing pages outside of Facebook. The one disadvantage when using Facebook Ads is that the restrictions on ad art, copy, and URLs are plentiful. But if you can navigate the Facebook Ads rules, this is a great PPC option. Note that the image you select will have a huge impact on the success of your ad. Try to choose something oddball, something that will make Facebook users stop and think, “What’s that an ad for?”

Floating Ads: Floating ads are the new popups. Instead of popping up in a new window, the ads simply hover over the current window. They require the user to click away from the ad to close it. It’s less obtrusive and far less spammy than the popup ad. With floating ads, the important thing is to highlight the benefits immediately. While these ads are more tolerable than popups, people don’t like being interrupted because they need a favour. Instead, offer a free eBook or recorded webinar in exchange for your favour. Use floating ads on partner websites (to drive traffic) or on your website (to capture emails).

Email Marketing

This weapon isn’t so secret. It’s common knowledge that email marketing is a powerful customer acquisition tool. First of all, the foot-in-the-door technique applies. Second, you have permission to push marketing messaging to an entire list of people.

There are two main ways to use email marketing in the customer acquisition process: following up and increasing retention.

Capturing an email is an easy way to reach out to a potential customer down the road. Say, when you have a discount or a special offer to follow up with. As long as you don’t abuse the list (leading to unsubscribers), you have a list of people who are somewhat interested in your product and are open to being contacted again.

Email also is a great way to improve your customer retention. The most valuable customer is the one you don’t lose. Keeping customers is just as important as acquiring new customers. Reach out to let them know about any outstanding notifications, recent updates, etc. Reignite their interest in your product via email. Remind them of what’s going on, what they’re missing out on, etc.

Hyper-personalised solutions using AI machine learning, for email marketing, identify consumer’s future behaviour by ranking every SKU by the greatest likelihood of that individual consumer to purchase from all the SKUs listed, in order of greatest propensity. It presents them to that individual at exactly the right moment, thereby maximising that individual’s customer lifetime value CLV potential. (i.e. Likelihood to Purchase, Discount Affinity, Likelihood to Churn etc).

Conclusion

There is more than one way to approach customer acquisition. Many different paths can lead to the same place. Choosing the right path for you depends on your audience and your customer acquisition funnel. But with the insights above, you should have no trouble creating a customer acquisition plan that works for you and your company. It’ll be unique, but it will be strategic and based on years of experience. The truth is there is no ultimate secret to customer acquisition. It’s a series of tactics integrated to create a custom process just for you.

Now that you’re a CAC pro, as a final tip, remember that your customers, costs and business will likely constantly evolve.