18 Useful Ways to Reduce Customer Acquisition Costs

One of the top priorities for all businesses is acquiring new customers which also results in one of their major pain points – reducing the cost of acquiring these customers.

Customer acquisition cost can be highly expensive, and can lead to a business running at a loss if they don’t downsize their marketing spend.

Here is a chart displaying the customer acquisition costs by industry:

Source

The issue of reducing CAC has caused a lot of nightmares for marketers, so the big question is: “How can you acquire customers without breaking the bank?”

Keep reading to find out, but first, let’s address the meaning of CAC to put us on the same page.

What is CAC?

CAC or Cost Acquisition Costs is the amount of money or expenses incurred in the process of attracting new customers to your business. It is a metric most businesses use to evaluate the effectiveness of their marketing strategies.

Here is a guide from Kantaloupe that explains Cost Per Acquisition in detail. 

How is CAC calculated? 

CAC is calculated using this simple formula: 

Total Marketing Expenses/Total Number of Customers Acquired

For example, if a business spent $1000 for marketing and the number gained 100 customers then their CAC is $10.

Finally, let’s delve into the different effective ways you can reduce CAC. 

Here are 18 useful ways:

1- Get Hyper Specific in Your Target Audience

The whole knowing and defining your target audience thing might sound cliche, that’s because it’s actually important. 

If you don’t know who you are marketing to, and I don’t mean a vague idea but a profound knowledge of your target audience, you might as well just throw your marketing budget on the streets for the public.

When you really know who you are selling to, you have already achieved 50% success, because it will influence all your marketing decisions.

customer avatar

Here are tips on targeting the right audience:

  • Don’t assume, know – Make your decision based on data-backed facts, not on guesswork. What do statistics have to say about your audience? 
  • Create a detailed buyer persona.
  • All your marketing copies should address your customer’s pain points.

2- Focus on Organic Growth

While paid advertising might be the best way to quickly reach your target audience, you shouldn’t underestimate the importance of growing organically.

When you don’t spend enough time trying to grow organically to get insights on what works and what doesn’t, it affects your paid advertising strategy.

organic growth content marketing

Because you jump into advertising quickly with no previous experience you end up wasting more money than necessary to acquire customers with poor results.

Therefore, focus your energy on organic marketing strategies like SEO before investing in ads.

3- Focus on Generating High-quality Leads

Lead generation is the backbone of customer conversions. Your aim isn’t just to generate leads, but leads that have a higher likelihood of turning into loyal customers.

Therefore you need to create your lead magnets, and landing pages to target only high-quality leads which takes us back to the first point of knowing your target audience.

The higher the quality of your leads the lower the cost incurred in converting them.

lead generation customer acquisition costs

Here are actionable tips on generating high-quality leads:

  • Make the definition of both your sales and marketing qualified leads to uniform.
  • Run lead ads with tools like Hootsuite and 
  • Implement lead qualification questions to filter inquiries from leads.

4- Establish a Customer Relationship Management

It is important to have a process in place on how you develop a relationship, communicate, and relate with your customers.

Having a CRM in place might seem a bit complex from the onset because of all the factors involved, however, it can really be helpful in reducing CAC. 

When you have the software installed to manage both potential and current relationships, it guides you towards making the most of each coin because nothing is done on a whim.

With CRM, things are planned and streamlined in processes and tracked to the core, leaving no stone unturned.

5- Increase your Website Conversions

Since you will be working on driving a lot of traffic to your website, you should optimise your website to turn those visitors into customers.

The easier your website generates customers, the lower your CAC. You can use tools like Google Analytics and Omniconvert to optimise the conversions.

So is your website converting visitors or driving them away?

google adwords conversion rate

Actionable tips on increasing website conversions:

  • Insert lots of testimonials on your website.
  • Optimise your landing page for your target audience.
  • Make your CTA clear and concise.

6- Strengthen your Inbound Marketing Strategy

Inbound marketing is a long shot but one that is worthwhile and pays off eventually big time. When you create valuable content for your audience it builds trust and establishes a long term relationship that turns website visitors into loyal customers.

Because Inbound marketing shows that you care about their needs over your products, and it influences their purchasing decisions positively.

content drives traffic

If you strengthen your Inbound marketing strategy, it reduces the expenses of luring customers as they will be more than willing to buy from you because they trust you. And trust is essential in a business and consumer relationship.

Not only does good Inbound marketing result in customer acquisition but it also deepens customer retention. Because when a customer loves your brand content, they share it with their acquaintances 

Actionable tips on strengthening your Inbound marketing strategy:

7- Prioritise Retargeting

What should you do when a website visitor shows interest in your products but doesn’t make a purchase?

That’s where retargeting comes in, it ensures your conversion rates are at a maximum.

facebook retargeting audience

When you retarget ads to prospects continuously, it makes the idea of coming back to your website to make purchases irresistible.

You can use different tools like Adroll and Criteo to successfully retarget your ads.

8- Apply A/B Testing 

Sometimes all it takes is just a change in the colour of a website to drive conversions, or a change of word. 

With the help of A/B split testing, you can experiment with different versions of your marketing materials like your landing pages, emails, etc to see which works best.

split test marketing

When you test variations of your marketing campaign, you get to optimise them for better marketing performance. This will ensure a reduction in CAC.

9- Invest in Marketing Automation

Not only does automation save you time, it saves you money also. Investing in marketing automation will make your customer acquisition seamless and more effective. 

The cost of hiring manpower to take care of certain tasks that can be automated will be eliminated. 

For example, chatbots are popular marketing automation that businesses use to connect with their website visitors personally.

10- Reduce Customer Churn

Every business nightmare is having a high churn rate, not only are you losing customers but you are building a bad reputation for your business.

Source: Growrevenue

Having a bad reputation or bad reviews from your customers makes customer acquisition difficult and expensive because you will have to triple your efforts and money.

Also, if your churn rate is high it simply means you are wasting time acquiring more customers that are going to leave eventually.

Therefore, work on reducing customer churn to improve your brand image.

Actionable tips on reducing customer churn:

  • Do in-depth research and analysis on why customers abandon your business. Then you can address the root cause.
  • Stop being overly promotional and pay more attention to educating your customers.
  • Know your most valuable customers and give them special treatment. This is not being partial, it’s paying attention to what matters most.

11- Leverage Social Media Marketing

Social media marketing campaigns when done right can skyrocket your customer acquisition base. Leverage social media ad campaigns creatively to get the most out of your marketing budget.

Since social media allows you to market to a lot of people for a small cost in comparison to traditional advertising, plus it has higher conversion rates.

messenger-ads

You can make the most out of social media marketing by doing the following:

  • Develop a branded user-friendly hashtag to fuel your marketing campaign.
  • Use user-generated content.
  • Partner with micro-influencers.
  • Drive engagement by asking questions and responding to comments.
  • Craft action-driven captions.

12- Increase Customer retention

Just as customer acquisition is a top priority, customer retention is also just as important. 

When you invest and focus on retaining your existing customer base, you can get them to do word of mouth marketing for you because they are impressed with your brand. 

Which is obviously more effective, because a recommendation coming from an acquaintance is more trustworthy over an ad from a brand.

customer reviews star rating

Also, the more repeat customers you get the lesser time you spend acquiring new customers.

You can increase customer retention by doing the following:

  • Provide stellar customer services.
  • Give discounts once in a while.
  • Improve the customer experience.
  • Provide high-quality products.

13- Implement Affiliate Marketing

Affiliate Marketing is becoming a favourite type of marketing for brands because you only pay a commission after a sale, therefore reducing CAC.

It is performance-based marketing, you only pay after getting results.

affiliate marketing

This is a cost-effective way to bring in new customers as you don’t have to worry about the whole process of luring people which is the duty of the affiliate marketers. 

With affiliate marketing, you can have an increased ROI from your marketing budget.

14- Prioritise Personalisation

In the marketing world, personalisation always wins because customers can relate and easily connect to your marketing messages.

In fact, personalisation can reduce acquisition costs by as much as 50%. Therefore, the more personalised your approach the more effective your marketing strategy is. 

Personalisation makes your target audience buy your products faster. 

Source: Emotivebrand

Here are some ways to implement personalisation in your marketing strategy:

  • Collect as much accurate data as possible to get valuable insights through carrying out surveys, interviewing your customers, and even using AI and more. 
  • Personalise your emails, and no don’t just stop at calling them their first name. Segment your emails and send personalized messages.

15- Increase Customer Lifetime Value

This is very important, the higher the CLTV of a customer the lower the CAC.

CLTV refers to the total amount of money that a customer can bring to your brand in the course of a given period. 

It’s important that you don’t just let your relationship with a customer ends after just one purchase. This will devalue all the efforts and expenses to acquire that customer. Therefore work on increasing their value in the long term.

value ladder

You can increase new prospects CLTV by doing the following:

  • Provide them with personalised value-packed packages.
  • Promote and encourage them to select the annual billing cycle if you are a subscription based business.
  • Upsell and cross-sell your services if you offer a wide range of complementary products or services.

16- Develop Social Proof

In the process of customer acquisition, the most effective way to reduce CAC is by getting your prospects to trust you.

social proof reviews

And with social proof, customers can easily trust you versus the absence of it. Social proof gives your brand an impressive image and with that, you sometimes don’t need to even spend a dime to get a customer. They will purchase your products at their own will because humans are easily influenced by their fellow peers.

  • Mention breakthroughs: What has your brand accomplished so far that is quite outstanding? What have you helped a client or customer achieve? What impact has your brand had? 

Don’t be humble about these answers, proudly mention it, people love to see it.

  • Work with Influencers: Partner with micro-influencers as they are more budget-friendly and even more effective. This is one of the best and quickest ways to achieve social proof.
  • Reviews: Get great reviews from your current customers as customers could spend 31% more on a business with great reviews.

17- Optimise your Sales Funnel

In the digital marketing world, your sales funnel can make or mar you. You need to optimise your sales funnel in a way that your prospective customers don’t waste time in the first two stages, which is the awareness and consideration stage.

You don’t want your customers to spend too much time in the consideration stage after being aware of your brand. Because the more time they take before making a decision, the more expensive it gets to convince these customers.

content funnel

However, you can influence your customers to make decisions easily and quickly by doing the following:

  • Create case studies to give them a vivid insight into how your products can be valuable for their businesses.
  • Sell them an accomplished goal: People are not interested in your products, they are interested in what your products can do for them. 

Therefore talk about their goals and how your products can help them achieve it. Instead of fussing over the perfection of your products.

  • Simplify the process, don’t overwhelm them with loads of Information that leave them confused. Instead, let them gain clarity with simple messages that are focused on addressing their pain points.
  • Always have a CTA for every content, make it clear and uncomplicated. Don’t just leave them hanging, give them a next action to take.

When you optimise your sales funnels for your prospects to make faster buying decisions, you drastically reduce your CAC.

18- Tracking Marketing Performance 

When you don’t track you can’t improve, change, or make adjustments to your marketing strategy.

And your marketing strategy needs flexibility in order to optimise it for what’s best to easily acquire customers.

When you just run your marketing campaigns with no metrics to track, you won’t know the direction your money is going. So here’s how to constantly track your marketing performance to reduce your CAC:

  • Setup conversion tracking in Google Analytics after setting up your conversion goals.
  • You should go to the acquisition overview in Google Analytics to view your top sources of traffic, and the channels giving you the highest conversion rates. 

This way you get to stop wasting money on places that are not delivering results and focus your attention on channels that are worth it.

  • Track your social media conversions: Use a URL shortener for your call to action links on social media posts to make it trackable. Then insert a cookie on the user’s machine to connect the lead to a campaign.

This way you can track the total number of clicks and conversions generated from the social media post. This will give you insights on the type of posts that drive conversions, you can now optimise your ads to generate those conversions.

Conclusion

The pursuit of reducing your CAC is a constant one that requires a combination of different creative strategies to achieve.

As mentioned consistently in the post, work on building an impressive and reputable brand image, and you will see customers flowing in.

And most importantly know who your target audience is, as this will have a great impact on the success of your marketing performance.

Start implementing these actionable tips and see its affect on your CAC.

Joydeep Bhattacharya is a digital marketing evangelist and the author of SEOsandwitch.com. He also regularly contributes on sites like SEMrush, Search Engine Watch, Business.com and Search Engine People. You can connect with him on LinkedIn.

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