What Is Customer Acquisition?
Customer acquisition is the process of attracting and converting new customers to your company. The goal of customer acquisition is to help good-fit prospects a) buy from you and b) stay with you and/or buy again.
Sounds simple in theory, right? But because customer acquisition isn’t always a piece of cake, we put together this handy guide, which will help you recognize, find, attract and acquire those good-fit customers.
Ready? Let’s go!
How To Create Your Customer Acquisition Strategy
A customer acquisition strategy is basically a structured answer to the questions: “how will I win new customers?” and “how will I turn visitors into active users?”
So, while you should make sure to answer those questions the best you can, keep in mind that customer acquisition is exactly that – acquiring new customers. It isn’t the same thing as, say, cost per lead or reducing churn. All these things are related to each other, though, and we’ll go through all of it in just a bit.
Let’s start with how to build an awesome customer acquisition process and strategy!
Which Questions Should My Customer Acquisition Strategy Answer?
- The very first question you’ll want to answer is: who are my best customers and ideal future customers? To find the right customers, you’ll want to create a hypothesis based on your data (customer lifetime value and customer acquisition cost are great data points to start from – but more on those later).Once you’ve got your hypothesis ready, make sure to get out of the building and actually talk to your paying customers and existing customer base. Interviewing them is a great way to figure out why they chose your product and what they’re trying to achieve with it. And that, my friend, is marketing gold.
- Think about what acquisition channels actually work best for those customers – and your company. For instance at Drift, we started a podcast early on, because our target audience loved podcasts and the format was perfectly suited for conversations (which just so happen to be our thing).
- You’ll want to be aware of the competition in your field. Who are the other key players? How do they acquire new customers? Once you’ve figured out what your competition is up to, you’ll want to do something that’ll make you stand out. They’re gating content? Ungate yours. They’re organizing a ton of webinars? Put together a live event. A SaaS company is asking for credit card details in exchange for free trials? Don’t ask for credit card details.But don’t ever let your customers confuse you with your competitors.
- Define clear and measurable goals against which you can track your performance. You know what they say: you can’t score if you don’t have a goal.
Actually talk to your paying customers and existing customer base. Interviewing them is a great way to figure out why they chose your product and what they’re trying to achieve with it.”
As HubSpot’s Senior Growth Marketing Manager Alex Birkett explains:
Many marketers will rush into an acquisition channel (or rather, many different channels simultaneously) by default, either because they themselves are an expert in that channel already (“if all you have is a hammer, every problem looks like a nail”), because their competitors are all seemingly competing in that channel (keeping up with the joneses), or because it’s the way things always have been done in their company and they don’t want to rock the boat.
Where I’ve seen the biggest step change improvements in acquisition is when the marketer takes a step back, does some customer research, builds out an acquisition channel matrix and a growth model, and runs minimum viable experiments to see where you can get some leveraged traction.
When you find sustainable traction in a channel with a high opportunity ceiling, I’ve found focus and doubling down is the best move. You typically have a limited shelf life on a given channel, and you want to exploit the competitive edge while you have it (you can always diversify later).”
Now, let’s look at us at Drift as an example. When David Cancel and Elias Torres founded the company in 2014, the category that became known as conversational marketing didn’t exist yet. And because the market was already swarming with competitors, we had to do a few things differently. Here’s how we approached the issue:
- First, we conducted a bunch of customer development interviews and found an underserved audience: product marketers. They were the guys who could set up Drift on their website without asking anyone for permission.
- We started curating an email newsletter specifically for product marketers. In fact, Dave Gerhardt (now our VP of Marketing) reached out to people one by one and asked them to subscribe to the newsletter.
- We built an active audience who were happy to contribute their own content and ideas for our newsletter. We got them to tell their friends about our content first and only then our product.
As another example, Dave was among the first marketers to tap into LinkedIn with viral videos — without spending a dollar to promote his content.
In short, the trick is to find out where your audience likes to hang out and what kind of content they like to consume. If you’re able to do that, results will follow.
Build On Your Customer Experience
While it may seem unintuitive, your customer acquisition strategy should actually be a part of your customer experience strategy. Why? Because your prospects are basically just future customers who haven’t bought from you yet.
Remember that word of mouth is basically the best form of customer testimonials there is. Think about it this way: wouldn’t you rather try out a product or service that was recommended to you by your friend or family member? If and when your new audiences do become your customers, they’ll want to keep receiving that same, consistent experience they heard about and had before they converted.
It costs 16 times more to build a long-term connection with new customers as opposed to encouraging existing customers to remain loyal to your product or brand.”
Keep An Eye Out For New Channels & Tactics
As digital marketing evolves, customer acquisition evolves with it. So it’s crucial for both your sales team and marketing team to pay attention to decaying channels and new opportunities.
Finding new channels for customer acquisition is a must when old ones become overused and lose their power. When someone discovers a new marketing channel that actually works, we get so excited that we eventually end up ruining the channel.
For example, when Facebook first came out, it was a great way for companies to drive organic traffic. But fast forward a few years, and the channel has basically become pay-to-play.
The most common channels for customer acquisition are:
- Website, 89% of companies
- Email, 81% of companies
- Social media, 72% of companies
- Direct mail, 66% of companies
- SEO, 65% of companies
Build A Brand
Especially if you’re competing in a saturated market, the best way to break through the noise is to build a brand. And that doesn’t just mean a pretty logo and some nice colors. You’ll actually want to stand for something and start a movement.
Just look at Salesforce, for example (fanboy alert). When they were first starting out, Siebel Systems basically owned the CRM market. But by managing to point out an obvious flaw in the way people bought on-premise software, they became (and have stayed) #1 in the CRM space.
The funny thing about brand is that loyalty comes with it. The idea is to build long-term demand and goodwill so that when your audience members are finally ready to buy, they’ll come to you first. And when you have a strong brand, taking over any new customer acquisition channel will be a lot easier.
How To Measure Customer Acquisition
Now that we’ve established what customer acquisition means, let’s talk numbers.
Customer Acquisition Cost
Customer acquisition cost, or CAC, is the most important metric for measuring customer acquisition. It is, in short, the cost of all of your sales and marketing expenses over a given period of time, divided by the number of customers acquired during that time.
CAC is calculated mainly to find out how much value a new first-time customer needs to bring your business in order to make your efforts profitable in the long run. This can be achieved by making sure that your customer lifetime value is higher than your customer acquisition cost.
Consider the indirect and direct costs of customer acquisition, including the time spent on writing and distributing a blog post, all the paid tools and platforms you used in the process, and your media budget for promoting the post.
How To Calculate Customer Acquisition Cost With The CAC Formula
There is a basic formula for calculating your company’s CAC. This is done by combining the total marketing and sales expenses and dividing them by the number of new customers acquired.
The formula is not as simple as it might seem, as simply calculating the result doesn’t give you all the information. This is why it’s a good idea to pay attention to the following things:
- Track whether the customers are actually new or returning customers
This formula should be used to calculate the cost of acquiring new customers, so existing customers should never be included in the equation.
- The expenses you include in marketing and sales costs
It’s important to remember to include all expenses, not just those that directly go into your marketing efforts. Include the money spent on all marketing costs, such things as ads, rent, salaries, equipment, publishing costs, tools, and so on.
- The time period between spending the money and acquiring a new customer
If the time period is not taken into account, you might overestimate or underestimate the costs. Figure out the average amount of time from your first marketing or sales efforts to acquiring the customer and build from there.
If you calculate your CAC monthly, for example, but it takes two months for customers to actually make the decision to buy your product or service, the equation won’t work.
Customer Acquisition Cost (CAC) Vs. Cost Per Acquisition (CPA)
Customer acquisition cost specifically measures the cost to acquire a customer. Cost Per Acquisition (or CPA) measures the cost to acquire something that is not a customer – for example, a registration, activated user, trial, or lead.
Naturally, we all hope that a user who starts a free trial eventually becomes a customer, but technically they’re not a customer until they buy something. This is why it’s important to follow these two metrics separately, and focus on customer acquisition.
CAC Vs. Customer Lifetime Value (CLV)
Customer lifetime value or CLV is the metric of trying to foresee and calculate the total value your customer will bring your business throughout their relationship.
CLV is the overall value your customer brings and CAC is the total cost of acquiring the customer, so maintaining a balance between the two is crucial. This is why you should calculate both your CLV and your CAC at regular intervals.
User Acquisition Cost Vs. Customer Acquisition Cost
The user is not always the same person as the buyer. Think about who you’re actually selling to: a large organization with multiple users, or an individual user? Acquiring users should not cost more than acquiring actual customers, especially when customers are paying for a product per seat (individual user).
Other Customer Acquisition Metrics To Track
Average revenue per user (ARPU)
With ARPU, you calculate the total revenue within a certain time frame, divided by the total number of acquired users during that time. This will help you estimate how much revenue each new customer is bringing in.
Churn rate refers to the share of your customers who ended their subscription or never bought from you again.
When you have calculated your CAC and know your marketing and sales budgets, you can compare those to your churn rate in order to find out whether you should actually be focusing on retaining your existing customers instead of acquiring new ones.
Besides, you can think of customer acquisition and customer retention as two parts of the same coin: ultimately your goal as a marketer is to acquire customers you can retain. If you simply focus on acquiring new customers who end up churning, it’s like pouring water into a leaky bucket, and customer loyalty is something to be earned.
The cost of attracting a new customer is five times that of keeping an existing one.”
Return on investment (ROI)
By comparing your return on investment (ROI) per channel to your CAC per channel, you’ll know which channels are paying off and which ones aren’t.
How To Reduce CAC And Optimize For Scale
Focus On Marketing To Your Ideal Customers
By far the best way to reduce your total customer acquisition cost is to focus on marketing to your ideal customers. That’s why your marketing strategy should include an objective definition of your ideal customer profile (ICP). The ICP should be agreed upon and understood by your entire company, not just marketing.
Finding and targeting the right audience segments reduces your customer acquisition cost in the long run because good fit customers tend to stay with your company for longer.
Optimize For Conversions
Conversion Rate Optimization (CRO) means testing different elements of your website from copy to layout in order to see what your customers find the easiest and most engaging to use.
A high conversion rate means more revenue. The more people perform a desired action on your site, whether it’s directly buying or simply subscribing to your newsletter, a larger amount of people will eventually end up buying from you (as opposed to a smaller amount of people converting).
This in turn means that having customers convert more quickly is more cost-effective. By A/B testing and optimizing the copy and design of your website you can directly affect the number of conversions.
Optimized content will:
- Boost your brand awareness
- Increase sales and profitability by bringing in more customers through
- Engage your audience and hopefully turn them into loyal customers
- Help you identify potential leads
The Best Customer Acquisition Channels & Tactics
Now that you know which metrics you should be tracking, it’s time to take a look at some of the most effective customer acquisition channels. But remember, don’t just copy what everyone else is doing, but base your decisions on your audience and your business.
Content marketing – an important aspect of inbound marketing – is all about producing educational and/or entertaining content for your audience. Be it blog posts, webinars, podcasts, videos or literally any other format under the sun, content marketing is a great way to get organic visibility to your brand. Content marketing can also be a great way to reduce your customer acquisition cost if, for example, you’re using it to attract high-intent search traffic to your website.
When done right, content marketing will act as a magnet that attracts people who are interested in your content, product or service. Quality content makes your audience trust your company as a valuable source of information, which eventually leads them to believe that if they buy something from you, it will offer them that same value.
But like Alex Birkett reminds, it’s good to stay open-minded when you’re first discovering the best customer acquisition channels for your business:
For example, if all you’ve done is content marketing, you may be able to get some incremental gains in that channel and bring in marginally more customers each month. But it may actually be the case that your target audience doesn’t spend a lot of time reading company blogs, so what you’re really doing in that case is optimizing towards a local maximum. With less effort, you may have been able to climb a different hill with a higher peak.
How do you know if you’re hill-climbing towards a smaller local maximum? It’s honestly really tough to tell, especially if you’ve already invested a lot of time and resources into a channel.”
Lesson learned: When it comes to customer acquisition, you’ll want to avoid putting all your eggs in one basket. Here are some other channels and tactics you can try.
The idea behind internal marketing is simple: make marketing everyone’s job. Your entire company should know and understand the importance of marketing and play their part in getting the message through to your audience.
The truth is that people buy from people they trust. And guess what? If all your employees started evangelizing your message to their friends, families, and social networks, you’d suddenly have a lot more people who trust your company – and want to buy from you.
At Apple, for example, every single employee from executives to retail associates is in charge of representing the company to the outside world. Everyone at Apple believes in their brand and company culture and conveys them to the outside world, which results in making their communication extremely consistent.
At Drift, we take internal marketing pretty seriously. We share our messaging decks, new landing pages and marketing plans with the whole company and actively come up with ways for everyone to contribute. We look at each new employee means as one more Twitter account and LinkedIn profile out there to promote our stuff, and we sure don’t want to miss out on that extended reach.
Social Media Marketing
Everyone and their grandma is on social media. That’s why it’s an excellent channel to promote your brand and content, and get traffic (either organic or paid) to your website.
With social media, targeting and personalizing your content is quite straightforward. Choose the appropriate platform based on your target audience, and choose on a wide variety of targeting criteria including workplaces and titles in LinkedIn to interests and demographics on Facebook.
Depending on your audience, in addition to popular channels like Facebook, LinkedIn and Instagram, it’s also a good idea to pay attention to social media platforms that aren’t yet as overused, such as Quora and Reddit. Social media influencers are also a big new player in the marketing field, so depending on your field, you could look into that as well.
You’ll also want to pay extra attention to algorithm changes on social media platforms. For example, LinkedIn recently made changes to their algorithm once they noticed that users with less followers gained less visibility on the platform even if they were actively engaging with other users. They’re now working to offer equal visibility to users with less contacts, but only time will tell how long that will last.
Search engine optimization or SEO is actually one of the few lead generation and customer acquisition channels that scale.
To a certain extent, there are only a few viable channels that truly have scale (SEO, virality/referral, paid acquisition, sales, and sometimes partnerships), so you can even narrow the field a little bit.
Some are better catered towards certain business models more than others (e.g. generally speaking, it’s tough to make the economics work for a channel like sales if your average order value is super low). Though when we talk about channels with the potential for scale, it’s usually in the context of venture-backed, high-growth, blitzscale type startups. If that’s not what your business is all about, you don’t even need to follow those prompts.
As a rule of thumb – and this goes for more than just customer acquisition – additional time spent learning about your customers (through behavioral analytics, market research and surveys, experimentation, etc.) is time well spent and has a nonlinear return on investment.”
And he’s right: SEO is a cost-effective strategy to bring more organic traffic to your site. It can quickly result in higher rankings, more traffic, and increased conversions.
And as Alex highlighted in his quote, when you’re just getting started, you’ll want to conduct customer interviews (and keyword research) to learn what people type into Google when they’re searching for your brand, product or service. When you know that, you’ll be able to create content that matches the intent of those search terms.
You’ll also want to make sure you are targeting keywords you can actually rank for. And don’t forget to work on your backlinks, as they’ll help you rank higher for competitive keywords.
In 2019, email marketing campaigns are one of the best ways to acquire new customers. In fact, according to a recent report by the Radicati Group, the amount of email users around the world will grow up to 4.3 billion by the end of 2023, and today, 91% of email users access their inbox at least once a day.
People don’t like spam, of course, but informational and valuable email content is another matter altogether. You should start by building an engaged email list of contacts and customizing your content to suit each audience segment. Not everyone wants to buy the same thing from you.
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Pay attention to your email content. Don’t make your messages repetitive, too long or pointless, and always have a real idea behind each email you send. Don’t send too many – receiving too many emails is by far the number one reason people unsubscribe from mailing lists.
And don’t forget to use your website effectively to gain more email subscribers with pop-ups and deals that ask your customer to subscribe to your newsletter or leave their contact information. Especially when it comes to longer sales cycles, email is a great way for you to stay top of mind.
We asked Kevin Indig, VP SEO and Content at G2, for his top customer acquisition tactics this year, and here’s what he had to say:
Though I value principles over tactics, what I found to be most efficient is to invest in curated newsletters. They allow you to create value that pulls users, and potential customers, into an environment you can control: email.
Now that everybody and their mother uses Slack, email inboxes are freed up. There’s a vacuum people tend to fill with informational newsletters. I’m not talking about the salesy stuff à la “here’s a coupon”. I’m talking about hand-curated news and content as I provide with my newsletter, for example.
Measure clicks and opens to understand what topics people resonate with. Engage with them over email and build a relationship. Make it an acquisition and retention channel.”
You heard it here first. What worked for Dave in 2014 still works for Kevin today.
We know it’s a cliché, but people tend to love great stories. Use good storytelling to your advantage by using video and audio to bring life to your brand.
You can create stories to inspire and motivate, explain complex subjects in an understandable manner, and bring more visitors to your site. Again, personalization is important, as not every story is interesting for everyone.
Best Customer Acquisition Platforms & Tools
Next up, you’ll want to choose the platforms that support your strategy and chosen channels. Here’s how to choose the right tools for your company.
In order to grow your search tactics and perfect your SEO, you could try out Ahrefs – a tool that offers you data to learn how to outrank your competitors in search engines.
To be able to actually score potential leads, it’s a good idea to look into tools like MadKudu – it helps you optimize your ads to attract high-value prospects, accelerate on the path to conversion and prioritize your best leads.
If you need a holistic platform for publishing and distributing content and measuring your marketing performance across different channels, Marketo is a safe bet. The software can help you with search marketing, landing pages, web personalization and social media, among a ton of other things.
If you’re already using a marketing automation system, you should check out Drift Automation – it’s like having your best sales rep available 24/7 on your website to answer questions.
As we’ve already established, email marketing is far from dead. And if you just want a standalone platform for managing your outgoing marketing emails, it might be a good idea to look into email marketing tools like MailChimp. Drift also has an email automation tool you should check out here.
Creating And Optimizing Landing Pages
If you want to easily test and optimize your website based on your goals and targets, you might like Optimizely.
Conversion Rate Optimization
You could start by checking out Google Optimize and Google Optimize 360 for simpler and more advanced targeting, A/B testing and personalization of the content on your website.
OptiMonk offers help with creating customized content like pop-ups, bars or notifications for website visitors based on their needs and respective stage in the buying process – at exactly the right time, for example when they are about to leave your website.
Hotjar is an analytics and feedback platform that helps you understand and convert your website or app visitors. The platform offers data including heatmaps, records and conversion funnels based on how your customers have behaved on your site, as well as polls, surveys and other tools for acquiring real-time feedback.
Another platform that’s worth mentioning is Crazy Egg, which provides you with data including heatmaps on where your customers are coming from and where they are navigating to, and where they tend to get stuck on your site.
If you need help with starting conversations with your prospects, Drift offers a bunch of great conversational marketing tools for that, including live chat, landing pages, chatbots, email, video and more.
But of course, we don’t want you to just take our word for it. Check out what our customers have to say and then decide for yourself. We’ll be here. Waiting. Patiently.
Your 7-Step Customer Acquisition Checklist
For your convenience, here’s a quick checklist you can go through to ensure you know what to do on your path to the customer acquisition hall of fame.
- Understand how your customers behave
- Identify the right channels
- Know your competition
- Don’t ever forget your existing customers
- Adapt to changes in the field
- Identify the methods that work best for you and focus on them
- Calculate the costs and make sure there’s a balance between what you’re spending and what you’re gaining
And there you have it. Better get acquiring!
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