Put simply, customer acquisition cost represents the average investment your business needs to make in order to convince each potential customer to purchase a product or service. It may sound like a simple concept, but lowering that cost is absolutely crucial to achieving sustainable growth. A high customer acquisition cost means tighter profit margins, and eventually you might even start to see your marketing costs translate into zero net gain—or even a loss. Luckily, there are a few straightforward strategies that can be implemented to reduce customer acquisition costs on even the tightest budget.
Finding ways to lower your customer acquisition costs means leaving no stone unturned, and one of the easiest and most cost-effective ways to accomplish that is by implementing stripped-down A/B split testing on as many elements of your marketing campaign as possible to assess whether any of them are weak links that could be improved. Embrace the lean marketing mindset by testing different landing pages, calls to action, logos, and ad copy—and try to get as much feedback as possible to best determine what is working in your favor and what is holding you back. By having a clear picture of what your customers are responding to, A/B testing allows you to improve content engagement, lower bounce rate, and increase conversion rates, all of which have a measurable impact on your bottom line.
A well-designed marketing funnel is built to increase brand awareness and drive conversions, and taking advantage of retargeting is a great way to make that funnel even more effective. Retargeting—also known as remarketing—is a technique that uses browsing cookies to show your ads to potential customers even after they’ve left your site in order to keep their interest in your product piqued and eventually redirect them back to your site to make a purchase. It may seem simple, but it’s a strategy that gets results: according to data released by Facebook, retargeted ads on its platform are 76% more likely to be clicked on than standard display ads. While retargeting won’t help drive initial traffic to your site, it can be an excellent, low-cost tool for converting potential customers who are on the fence, and it’s also effective at pushing other customers through the marketing funnel at a faster rate without making them feel pressured.
One of the most obvious ways to reduce customer acquisition costs is to ensure that more of your first-time customers becoming returning customers, and the best way to accomplish that is by making a concerted effort to improve your point of sale interactions for new customers. Average customer service is unlikely to be remembered, but going above and beyond will make it much more likely that a customer remembers your brand and spreads the word to friends about your business. How can you improve those point of sale interactions? Ensure that your sales funnel is intuitive and that your service and delivery is prompt, that your inventory is well-stocked, and that anyone who is dealing with customers face-to-face is well-trained and knowledgeable about your product. Make your company accessible through social media—if customers feel that they can come to you with questions or concerns and have them dealt with in a prompt and friendly manner, your business is going to stick out. The better the customer experience, the less time, effort, and money you will need to put into convincing them to buy from you.
Another excellent way to cut customer acquisition costs is to reduce the amount of direct interaction needed to successfully close a sale. This is best accomplished by emphasizing a “light touch” approach by anticipating what prospective customers will be looking for and providing it ahead of time, whether it’s in the form of a software demo, an in-depth video tutorial, or a publicly available comparison chart that shows how your product’s features stack up against major competitors. Lowering sale cycle complexity has an enormous impact on the viability of any startup, and in many cases, coming up with a strategic plan for anticipating customer needs combined with strong SEO and inbound marketing techniques can allow you to create a “touchless conversion” model that eliminates the need for traditional salesperson roles entirely.
One of the simplest ways to attract new customers on a budget is to offer some kind of incentive, whether it takes the form of a giveaway, a referral program, exclusive offers, or any other number of promotions that create a sense of value for participants. For companies on a budget, small giveaways may not attract the same number of potential customers that, for instance, giving away a brand new car might, but there are actually some easily overlooked benefits. Giving away an inexpensive product can still be a useful tool for gauging market interest, especially if you have other similar promotions to compare numbers to, and there’s also a benefit to keeping the prize connected to your brand identity – a clothing company giving away a new phone might attract plenty of entrants, but most of those people won’t be interested in buying clothes afterward, whereas offering a piece of clothing from their brand-new line would have a much better chance of converting visitors into future customers. It’s also worth noting that these kind of promotions are an ideal opportunity to gather important data – making contest entrants complete a short survey in order to be entered into the drawing is the most common way of doing this, and many companies even offer a small discount code to all entrants to create a sense of direct value and encourage a higher conversion rate.
Finding a way to lower customer acquisition costs should be a central part of any serious business strategy, and striking the right balance often spells the difference between a business that is seeing consistent growth and one that is stuck treading water. By applying the strategies above, it is possible to analyze your current marketing strategy, identify areas where costs can be cut, and ultimately optimize the efficiency of your sales funnel.
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Nectar is part branding powerhouse, part consultancy, and part digital marketing agency based in Manhattan.