What is Customer Acquisition? The Marketer’s Guide

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Regardless of your business model, it’s getting harder and more expensive to acquire customers. In fact, customer acquisition costs have jumped by more than 50% in the past five years alone. Brick and mortar retailers have been squeezed by the pandemic, and ecommerce websites have faced massive competition from online retailers like Amazon.

Marketers can’t blame one single cause. Instead, rising costs have been driven by a combination of factors, including:

• Decreased consumer trust in brands
• Increased competition
• Rising advertising costs
• Lower organic reach on social media

To help you regain control, this step-by-step guide reveals how to develop an effective customer acquisition strategy, identify the right channels, and drive better outcomes.

What is customer acquisition?

MARKETING
TERM
DEFINITION

Customer Acquisition

Customer acquisition is the process of convincing more people to buy from you, which increases the size of your customer base. It includes all of your sales and marketing activities, and ends at the point of sale.

All things being equal, more customers means more revenue. However, if you pay too much for customer acquisition, your margins will suffer. As a result, you’ll have less profit to reinvest in the business, and shareholders will look for better investments.

So, an effective customer acquisition strategy should focus on business growth as well as profitability.

Develop an effective customer acquisition plan

You need a clear customer acquisition plan to acquire new customers at a reasonable cost. Otherwise, you’ll likely stumble from one tactic to another, and you won’t achieve a reliable, profitable, and scalable process.

The first step is to define your ideal customer. Who is your perfect customer and what makes them such a good fit?

Create buyer personas

Create buyer personas to understand your target audience in as much detail as possible. Conduct interviews, polls, and surveys. Study search data. Monitor their conversations on social media. See which emails and Facebook ads resonate the most. What problems are they trying to solve and what issues do they care about? Do they turn to Google or Amazon for answers? What is the “job to be done” that your product fulfills?

Here are 9 solid examples of buyer personas to get you started.

Once you’ve defined your ideal customer, determine:

• The acquisition goals you’re seeking to achieve
• How you will measure success
• Timelines
• The channels you will use to connect and engage with them
• The tests you will conduct to optimize your acquisition programs

Finally, take time to analyze your competition. What strategies are they using to acquire customers? Find their weaknesses and then perform a bit of marketing jiu-jitsu in capitalizing on their weaknesses and galvanizing your comparative strengths. Find specific ways to clarify your differentiation and set yourself apart from others in your space.

Identify the right acquisition channels

A key part of your acquisition strategy is finding the right customer acquisition channels. Think about the places your existing customers spend most of their time and how you can provide value in those particular channels.

For example, the social media tools developer Buffer doubled down on guest blogging. As a result, the company acquired more than 100,000 customers in the company’s first nine months.

Beyond simply acquiring more customers, think about how you can reduce your costs to win more business.

Enterprise SEO strategy

As seen in the online bank case study above, enterprise search engine optimization is an incredibly powerful channel for new customer acquisition. Think about it. When potential customers are searching for answers at the top of the funnel, where do they go first? 

Google.

If you can consistently show up on Google page one for valuable keywords, you can connect with prospects who are actively looking for what you have to offer. When you know what potential customers are looking for and are able to provide them with truly valuable content that aligns with their intent, you are well-positioned to win them over as new customers.

What’s more, SEO is both cost-effective and scalable. Plus, the ROI of SEO compounds over time, making it especially attractive to growth-oriented companies. In its economic impact report, Google itself estimates that SEO produces an average ROI of 5.3X.

Find out how to develop an unstoppable SEO strategy.

Blogging

Your blog can be an extremely valuable customer acquisition tool, and companies like Levi’s, Schwab, HubSpot, King Arthur Baking, and Refinery29 have all used blogging to fuel growth.

There are several key benefits of an SEO blog strategy:

• When optimized for search, blog posts increase website traffic.
• Blogging allows you to thoroughly explore specific topics, which in turn provides large amounts of value to your audience. 
• It positions you as a thought leader in your industry. 
• You can demonstrate your expertise to potential customers. 
• You can let your brand personality shine through.
• Plus, blogging delivers a substantial ROI.

Content marketing

With such a broad definition of content marketing, you’ll need to narrow down your own strategy to the activities that matter most to your business goals. Obviously, you’ll need to create highly valuable, relevant content. But, you also need a plan to distribute that content to a wider audience. It can include everything from blog posts to videos, white papers, market research reports, lookbooks, infographics, data visualizations, webinars, SlideShares, social media posts, and podcasts.

Your digital content marketing strategy should educate your potential customers about their challenges as well as how you can help them solve them. Or, in an area like fashion, you can reveal the trends and upcoming direction of the market so that they are “in the know”. Ultimately, this leads to deeper relationships with customers, a higher conversion rate, greater customer retention, and a stronger brand.

For more inspiration, check out these incredible content marketing examples from well-known brands.

Video marketing

Video marketing is gaining traction as an effective channel for running customer acquisition campaigns. Its rise in popularity is due to several key factors:

• Videos tend to get more engagement on social media than other formats — especially on Linkedin.
• Video production has become significantly easier and cheaper in recent years thanks to powerful smartphone apps. 
• Video marketing is uniquely experiential, helping brands to connect on a more emotional level with audiences. 

And it’s difficult to argue with the results of video marketing. According to a 2020 Wyzowl study:

Social media

With billions of cumulative daily users, social media platforms allow you to build an engaged audience who are genuinely interested in what you have to offer. And if you’re able to engineer viral posts, you can quickly gain a great deal of exposure for your business.

Knowing the power of social media as a customer acquisition tool, Shopify focused on putting out a daily video on Facebook for three months. One of their videos was about how to start a t-shirt shop in only 10 minutes. It racked up over 8 million views, over 30,000 shares, and generated a large number of customer sign ups.

Email marketing

Despite being 25+ years old, email marketing is still going strong. Why? Because it’s still incredibly profitable, generating a return of $38 for every $1 spent. Brands that describe their email marketing programs as successful achieve even better returns, reporting an average ROI of 42:1.

Is this your first time building a list? Discover 14 ways to get more email subscribers here.

Paid media

Paid media, such as social, search, and display ads, allows you to get your brand in front of a specific group of people at scale. The main advantage of paid media is its speed.

Another benefit of paid media is that you can increase or decrease the volume of ads as circumstances dictate. If you want to shift your focus to acquiring more organic traffic, you can easily reduce your paid ad spend.

Paid media allows you to test out new messaging or offers, and gain initial traction for a new product or service. The downside of paid media is that customer acquisition costs tend to be high. In addition, once you stop priming the pump with dollars, all related acquisitions immediately go to zero.

Read our PPC vs SEO comparison to find out which is better.

Account Based Marketing (ABM)

Account Based Marketing (ABM) is an outbound marketing strategy you you to target specific high-priority companies. On the other hand, an inbound strategy attracts new leads to you.

With ABM, you create personalized marketing for very specific, targeted companies. So, you have full control each customer touch point and brand interaction.

ABM allows you to uniquely stand out in a crowded, saturated market. No other channel affords you the ability to customize per account as much as ABM. And though this customized approach requires a bit more time and effort, it often yields a higher ROI than more broad-brush customer acquisition efforts. In fact, according to an ITSMA study, 99% of marketers confirmed that they generate a greater ROI from their ABM programs than all other types of marketing programs.

Influencer marketing

Influencers are a powerful lever to increase brand awareness through word of mouth. If you build the right relationships, they can help you amplify user acquisition.

Set up customer referral programs with industry movers and shakers, and work with them to develop and improve marketing tactics. They’ll get a referral fee, and you’ll grow your customer base.

Improve customer acquisition performance

Once you select your primary customer acquisition channels, you need to focus on improving the performance of each channel. The more you can optimize your marketing efforts, the lower your acquisition costs will be and the higher your marketing ROI. 

Here are a few ways to improve performance of the customer acquisition process. 

Landing pages

At a minimum, every marketing campaign should have its own unique lead gen landing page. This allows you to customize the landing page for the specific message and offering and to accurately measure the results.

If you send leads to the homepage of your website, you miss out on the opportunity to align with their specific interests, customize the pitch, and have a greater impact.

For example, say you sell a product with features that appeal both to marketers and HR personnel. Creating separate pages for each audience allows you to uniquely highlight benefits and features that appeal to that particular group and resonate more deeply.

A/B testing

A/B testing is essential for improving overall customer acquisition performance. It allows you to find what resonates most with your audience and then double down on it. You should test the following elements:

• Headlines, body copy, imagery, calls-to-action (CTAs), and the layout on your website and landing pages
• Text, images, headlines, and CTAs on social media posts
• Email subject lines, messaging, and CTAs
• Blog post headlines and CTAs
• Blog post title tags and meta descriptions
• Video titles, length and formats
• And more

When you identify a winner, implement those changes and then move on to your next experiment. This allows you to make consistent, incremental improvements to your customer acquisition.

Digital behavioral analysis

Behavioral analysis allows you to read the “digital body language” of your website visitors. Using behavioral analytics tools, see beyond page views to uncover how visitors are actually behaving on your pages. You can see where they’re clicking, how far they’re scrolling, where their attention is focused, why they encounter any friction, and where they abandon ship.

This data allows you to identify underperforming pages and then make key changes for a better digital customer experience. You can see if your messaging isn’t connecting with customers and identify holes in your content marketing funnel. You can also add in behavior-specific CTAs that trigger only if a person takes specific actions.

How to measure customer acquisition

The only way to know if your customer acquisition efforts are succeeding is to carefully measure them.

Calculating customer acquisition cost

Customer acquisition cost (CAC) is the total sales and marketing costs for acquiring one new customer. It’s the amount spent in a given period of time divided by the number of customers acquired in that same period.

CAC = (Marketing Costs + Sales Costs) / # of Customers Acquired

When calculating the cost of customer acquisition, make sure you include all costs, not just direct ones. For example, if you plan on utilizing content marketing, you need to include the time required to create and distribute the content, including all strategy, copywriting and design costs. You’ll also need to include promotional costs, the cost of content management software, etc.

If your CAC isn’t higher than your customer lifetime value (CLV) (the amount of revenue a customer brings in over the lifetime of your relationship with them), you’ll endlessly be losing money. Your goal is to optimize your CLV/CAC ratio for maximum profit.

How to reduce CAC

One way to increase your CLV/CAC ratio is to reduce overall acquisition costs. Assuming all things remain equal, reducing your CAC increases your profit margin and strengthens your bottom line.

Some ways to reduce CAC include:

• Improve your funnel — The more effective your marketing funnel, the lower your CAC. To do this, you need to know how much a lead costs and how many of those leads turn into paying customers. Once you have this data, you can begin to optimize each section of your funnel.
• Use lower cost channels — Organic channels, such as SEO, cost much less than paid media. For example, Terakeet acquires customers for 87.41% less than paid media on average, and can achieve a 12.2x ROI.
• Utilize marketing automation — Marketing automation tools can reduce the amount of manual effort required for acquiring, nurturing and ultimately converting leads to customers. This allows your sales team as well as your marketing team to focus on more high-value activities.

Increasing your conversion rate

Upping your conversion rate at each stage of the marketing funnel goes a long way in reducing your CAC and providing a superior experience to your customers, which in turn increases LTV.

A higher conversion rate translates into better lead generation and more paying customers. You have to pay less to acquire new customers, and you can invest that extra capital in more marketing, which brings in even more customers. It’s a virtuous cycle, with each improvement in the conversion rate having a compound effect.

Read our 41 point ecommerce conversion rate checklist for more insights!

Your competitive advantage

Yes, it’s true that acquisition costs are rising. But this actually gives you a competitive advantage. When you have a clearly defined customer acquisition strategy, identify the most effective acquisition channels, and consistently improve your overall performance, you’re in a position to leapfrog those companies that don’t have clarity on these things.

So, do the work needed to implement a highly effective acquisition strategy, and you’ll generate more leads consistently for strong, robust growth.