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Customer Acquisition

Everything you need to know about customer acquisition

The cost of everything is rising, and customer acquisition is no exception. Over the past five years, customer acquisition cost (CAC) has risen by almost 50%. Almost every business is under pressure to keep the flow of new customers coming, but how can you keep them coming without cutting into your margins? You need a strategy.

Let’s explore what customer acquisition is, how to create an effective strategy, and how to measure and reduce the costs involved.


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What is customer acquisition and why is it important?

Simply put, customer acquisition, also known as client acquisition, is the process a business uses to gain new customers. The term typically refers to the entire customer journey funnel, from when they first become aware of your business to actually buying your product or service.

You may have several processes you follow to attract new customers, but they should be a part of a sustainable strategy so that your customer base is constantly growing.

Even if you have a loyal customer base, if you want your business to grow, you need to acquire new customers, as this will give you the revenue you need to reinvest in your business, hire more staff members and show any investors that your business is a healthy investment.


How to create a customer acquisition strategy

It goes without saying that your customer acquisition strategy will be unique to your business, but what should it include? You need to consider three key things when creating your strategy:

  • Your customer acquisition objectives
  • Your target audience
  • The channels you’re going to use to reach that audience

That’s a lot to think about! Let’s go through each point in more detail.

1. Decide what your customer acquisition objectives are

Think about your overall business objectives and how customer acquisition will play a role in helping you achieve them. One of your customer acquisition objectives may be as simple as increasing revenue, enquiries or your customer base. Alternatively, you may be more focused in keeping acquisition costs down and improving your margins.

Whichever objective(s) you choose, make sure they’re SMART (specific, measurable, attainable, realistic and timely). You need to define exactly what you’re going to achieve, how you’re going to achieve it, how you’re going to measure it, and within what timeframe.

2. Define your target audience

Who are your existing customers? Are you going to try to get into new markets? If so, have you done the relevant research? There’s a lot to decide when defining your target audience(s). The best place to start, is by looking at your existing sales data and who visits your website.

By using tools like Google Analytics, you can see which demographics are visiting your website currently and how they’re interacting with your brand across various channels. You can also start tracking your audience through the reviews they leave.

Tools like Feefo’s Insight Tags allow you to segment your reviews by almost anything, from age and gender, to what product they bought. This means you can see what types of customers are saying about your products and service, making it easier to target them about the things they care about. Younger audiences, for example, may value quick delivery highly, whilst your older customers might care most about having a friendly support team.

One of the best ways to define your audience is by creating customer profiles. You can find out more about how to create profiles here. 

3. Choose your customer acquisition channels

There are so many channels you can use to improve your customer acquisition that you can’t possibly focus on them all. You need to know which channels you should heavily invest in, which ones you should have a presence on, and which ones you should avoid completely. Deciding your customer acquisition channels will depend on where your audience is and which channels will be best at hitting your chosen objectives.

Organic search marketing

Chances are, a huge chunk of your audience finds your site through organic search, which means they’ve searched for something related to your business via a search engine and found your website as a result. An SEO (search engine optimisation) expert can help optimise your website and provide advice on how to rank more often, and higher up for search terms relevant to your business, but if you can’t afford to hire an agency or an extra pair of hands to help you, there are things you can do to drive more traffic to your website, including:

Content Marketing

Content marketing isn’t just about writing blogs, it’s about producing a whole bunch of content that you know will be useful, educational or entertaining to your audience. From guides and case studies to videos and webinars, there’s so much you can produce that will attract your audience to your website, and different content can serve different purposes. A case study with someone who loves your service will help build trust and can help drive enquiries, whilst a how-to guide can boost brand awareness with those who are early on in their customer journey.

Off-page SEO

You don’t just have to create content for your own site. In fact, getting your brand mentioned on other sites is a great way to improve your SEO and drive traffic to your business. Do some research and find out which websites your audience visits on a regular basis and see if it’s possible to guest blog on those sites.

PR

Get involved in everything from events to interviews, as long as they’re relevant to your brand and audience. Any time you release a new product, reach an important milestone or start a new partnership worth shouting about, put together a press release and push it out to relevant publications. Don’t underestimate the value of other people talking about your brand!

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Paid search marketing

It’s not always possible to get in front of the people you want organically, which is where paid ads come in! If you want to appear at the top of search engines for specific search terms, you’ll need to invest in pay-per-click (PPC) advertising, but even when it comes to paid ads, competition is still tough. Fortunately, you can use your customer feedback to stand out.

By collecting reviews through an independent review platform trusted by Google, such as Feefo, you can become eligible for seller ratings on paid ads. This means a star rating can be displayed next to your ad, building instant trust with searchers and helping your ad stand out. However, seller ratings are displayed at Google’s discretion and there are a few requirements you have to reach before you become eligible for this feature.

Alternatively, you could use Feefo’s Review Enhanced Ads (REA) tool to automatically identify your best review snippets and pull them into your PPC ads. Using real quotes from genuine customers builds confidence in shoppers, which means they are more likely to click your ad and convert. Your REA ads can be split-test against your best performing ads, ensuring you’re constantly improving your ad copy, boosting your Quality Score and reducing your cost-per-click and cost-per-acquisition.

It’s not all about Google Ads, though. Social media ads can be powerful too, but you need to know which platforms your audience uses first. Facebook is the world’s biggest platform with almost 2.5 billion users worldwide, so it’s a good place to start. Fortunately, we can help with that too.

By using Feefo’s Advertising for Facebook tool, you can pull your product star ratings into your Facebook ads, making them more engaging, trustworthy and therefore more likely to attract new customers. Music retailer Andertons reported 151% higher conversions, 190% increase in overall conversion value and 11% reduction in cost-per-click on ads with reviews compared to those without.

“Using AFB to optimise our Facebook dynamic ad campaigns has been a revelation for us. It means we can confidently make use of this channel, which converts healthily at a fraction of the anticipated cost. Making a small but very significant change to our ads has really impacted our conversion rates.”

Jack Cooper, Digital Marketing Manager

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Email marketing

Email is still one of the strongest, if not the strongest, marketing channel there is. Not only does it boast a return on investment (ROI) of 4,400%, it’s also one of the best ways to learn more about your target audience without having to ask too many questions.

Segmenting your data is easy (as long you have a good data management system), allowing you to tailor your content and track how each audience interacts with your emails. For example, by segmenting your data by ‘male’ and ‘female’, you could find that female customers may prefer written how-to guides, whilst men are more likely to click on video content. This means you know what content works so you can plan your content marketing better and improve your customer acquisition.

Email can help nurture people who have only just become aware of your brand as well as loyal customers, so it plays a key role in customer acquisition as well as retention. Remember to include some form of social proof in your emails to help build trust with your subscribers and boost conversions. Our score badge widget can be placed in your emails, automatically updating as you get more and more feedback.

Social media marketing

Social media is an easy, free way of communicating with a huge potential audience, making it great for customer acquisition and general brand awareness. There are 3.4 billion social media users out there and each one has an average of 5.54 accounts each, but with so many platforms to choose from, which ones do you focus on?

Don’t just pick the most popular or the ones that are hot right now. TikTok has 500 million active users worldwide, but 41% of them are aged between 16 and 24, so if that’s not your target audience, it might not be the right platform for your brand.

Whichever platforms you choose, you need a strong strategy to be successful on social media. Building your audience takes time, so you’re unlikely to see results immediately, but it allows your brand to have a real personality and talk to your audience directly. It’s also another way to share all the great content you’re producing as part of your customer acquisition strategy; visual content, such as video, works well across all platforms, but you can also share new products, promotions, reviews, blogs and so much more.


Measuring customer acquisition cost (CAC)

Now you know how to put together a customer acquisition strategy, you need to be able to measure how effective it is. Measuring your customer acquisition cost is easier than you might think. Let’s take a look at how to calculate your customer acquisition cost, what good looks like and how to reduce it.

Calculating customer acquisition cost

CAC

The formula for working out CAC is simple. All you need to do is divide the cost of sales and marketing with the number of new customers acquired. Of course, you need to decide what period of time you’re measuring (monthly, quarterly, annually?) and you need to know the cost of your sales and marketing.

To work out the cost of your sales and marketing, you may need to include the following:

  • Content promotion – how much you spend on advertising (print and digital), publishing and PR
  • Employee salaries – including bonuses and commissions if applicable
  • Technical costs – how much your teams spend on the software that allows them to do their jobs
  • External costs – such as outside designers and developers

These are only a few examples – you may have more expenses to consider.

What’s a good customer acquisition cost?

While you should always be working to keep your customer acquisition cost down, you need know what ‘good’ looks like. A £50 customer acquisition could be expensive to an online bookshop, where the average order is just £20, but to a software company whose subscriptions start at £99 per month, it’s a much more positive figure.

Customer loyalty and average spend both play a part in determining how good your acquisition cost is. That’s why it’s best to calculate your customer lifetime value (CLV) and work out your CLV:CAC ratio, as this will show you if you’re spending too much, or not enough, on your marketing.

Ideally, your CLV:CAC ratio should be 3:1. If it’s 1:1, you’re spending too much on your sales and marketing, but if it’s higher than 3:1, you might not be spending enough!

Reducing your customer acquisition cost

If you’re spending too much on your sales and marketing, there are lots of things you can do to reduce your outgoings. One of the key ways Feefo can help with reducing customer acquisition cost is with your PPC.

We’ve already briefly mentioned our Review Enhanced Ads tool, which allows you to put your best review snippets into your Google Ads. Fire Label managed to reduce cost-per-conversion by 24% with REA, as well as increase revenue by 25% and conversion rates by 33%.

On the Beach also improved their Quality Score and PPC ROI once seller ratings started showing on their Google Ads. Reviews may be more powerful than you think!

“When we began to see the Google star ratings appear on our PPC ads due to customers leaving feedback through Feefo, On the Beach saw an increase in click-through rate of up to 4%. This in turn improved our Quality Score and pay-per-click ROI which allows us to bid more aggressively. We have seen a direct correlation between good star ratings and an improved CTR on our ads.”

Alistair Daly, CMO

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Another way that Feefo can help reduce your customer acquisition cost is by helping your staff members become more efficient. AI-powered tools like our Performance Profiling technology analyses your reviews for you, highlighting any weak points as well as your biggest strengths. This saves your support and marketing teams precious time, as they can quickly see which parts of your service and products should be promoted and which need to be fixed or improved.

The best way to use your reviews to reduce your customer acquisition cost is to create a consistent customer journey across all channels. Ratings and reviews build trust throughout the customer acquisition process, from when a consumer first discovers your brand right up until they click the ‘buy’ button.


Customer acquisition vs customer retention – which one is more important?

We know how important it is to attract new customers, but you can’t forget about your existing ones, so which should you focus on – customer acquisition or retention?

It all depends on your strategy. If your business is taking a new direction in a way that will impact your target audience, you might want to focus on acquisition, but generally speaking, you’ll probably want a balance between the two.

Here’s why you need to focus on customer retention as well as acquisition.

Why customer retention is important

Depending on how your budget is spent, new customers can be more expensive to acquire than retaining existing ones, and, depending on how you attract them, may not be as profitable. For example, if you attract lots of new customers by using a special offer, but they never use your business again after taking advantage of that offer, your customer acquisition could be working at a loss to your business.

By not focusing enough on customer retention, your customer lifetime value (CLV) could be too low. Plus, focusing on nurturing existing relationships with your existing customer can help attract new ones. Whether you’re focusing on improving your customer experience or growing your customer service team, you can demonstrate to consumers that you care about them. Of course, a great way to show them how much you’ve improved is by using your customer reviews!