Customer Acquisition and How to Improve It

Methods and Strategies

Retail Customer Loyalty Rewards Program definition, benefits, statistics
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Customer acquisition is the process of bringing new customers to your brand. This typically is done through marketing, and one of the goals is to maintain a consistent influx of new customers.

This process almost always has costs associated with it. While there are many different ways to acquire customers, some methods can be tracked more easily than others. Ultimately, you want to do the least amount of work and spend the least amount of money to get as many customers as possible into the fold.

Customer Acquisition Methods

Any form of advertising or marketing is designed to attract people to a product or service so they can become brand loyalists eventually. Above the line advertising, such as billboards, television and radio spots, posters, print advertisements, and cinema spots do a great job of getting a brand in front of millions of eyes, but they rarely close a sale or include methods to track customer conversion.

Through the line and below the line advertising is where the process becomes much more scientific and informative. For instance, a direct mail pack that contains phone numbers or mailing addresses provides an advertising agency with data that can help them track:

  • How many pieces were mailed out
  • How many pieces were opened and responded to
  • How many pieces resulted in a sale, or conversion

Customer acquisition has found a similar home in social media, with Facebook and Twitter, in particular, being great resources for outreach. You can target customers and keep them informed of great offers or new product lines. You can make them feel valued, talk one-on-one with people, and share insights that build the brand.

Customer Acquisition Cost

Calculating how much money it costs to bring in customers is known as the customer acquisition cost (CAC). It's a simple calculation that divides marketing costs by the number of customers acquired. For example, if your company spends $5,000 on a marketing campaign that attracts 500 new customers, your CAC would be $10 ($5,000 divided by 500).

The calculation typically gets much more complex than this. For example, to calculate marketing costs, you also have to calculate everything that goes into marketing, from the actual cost of specific campaigns to the overhead costs associated with maintaining a marketing department that manages the campaigns. Your CAC can be measured by campaign, by quarter, annually, or however you may need to measure it.

The biggest reason this number is important is so you can determine how much value each new customer needs to bring. For example, if you're selling widgets that result in a pre-CAC profit of $9 for each sale, then your CAC of $10 clearly is too high: It's costing you $10 to acquire each customer that results in a return of only $9. The goal obviously is to acquire customers who will spend enough to more than offset the cost of acquiring those customers.

A Social Media Example

If you want to increase your following on your Facebook page, you might coordinate a simple giveaway that requires entrants to bring your brand to the attention of those who do not already follow you.

Start by deciding what to giveaway. For the purpose of this example, consider it to be a pair of widgets, each with a value of $20. Then, create a Facebook post promoting the "free pair of widgets to one lucky winner." Include a picture of the widgets in a creative and appealing fashion and write the posting in a way that should intrigue those who see it. Explain that entering the contest is as simple as tagging a friend in the comments section for the posting—and the friend must not already be a follower of your business's Facebook page.

Spend another $20 to promote the post on Facebook, then hold your online drawing on a specified date a week or so after the post was created.

With this kind of campaign, you're spending only $60 (two widgets at $20 apiece and another $20 to promote the Facebook post) and the time it took to create the post. In return, you have the potential to grow your online following and perhaps add more paying customers.

Measuring Success

Social media campaigns are among the easiest to track because you can see just how many people are seeing your post, how many are clicking through, commenting on it, tagging friends, etc. In the example of the free widget giveaway, you can track exactly how many potential new followers were tagged, how many of them liked your page, and how many of them made an online purchase. If just four new followers are impressed enough with your business to buy a widget, your sales have exceeded the cost of your campaign, and you hopefully have acquired a handful of loyal customers who will spend more money in the future.

This example obviously is most applicable to a small business on a small scale, but large campaigns work much the same way.

Improving Customer Acquisition

One of the keys to acquiring new customers is looking where you've not looked previously. In other words, diversify your marketing strategy. If you've been relying only on print or television advertising, it's likely time to shift more resources to online strategies or to radio. By doing this, you'll be getting your message out to an entirely new group of people.

It's also important to build brand loyalty. Acquiring customers is important, but those customers will be most valuable if they come back again and again. Hopefully, they'll even tell their friends, helping you to acquire new customers through word of mouth. This even can be part of your strategy. By marketing your products heavily to opinion leaders in your community, you can more rapidly build a loyal following that can grow through word of mouth.

Another way to build brand loyalty is by being visible in the community. Put together a calendar of events in your community and highlight the events that are likely to attract your target market. For example, if you are selling a product or service that would be beneficial to parents of school-age children, then target events geared toward school-age children. Look into sponsorship or partnership opportunities. If vendors are allowed at some events, inquire about getting a table. The more you make your presence a regular part of these events, the more likely people are to become familiar with your product and want to try it out.