Customer acquisition is harder than you think. That’s right, the thing that seems so blatantly obvious and crucial to business success is also the most difficult and, surprisingly, the most overlooked when it comes to evaluating business ideas.
Hypothetically, let’s say that you start up a new business that sells what you consider to be the greatest new product on the market today. Product investors have thrown boatloads of money at you to produce this incredible new creation. You have total and utter pride in your innovative product which will solve problems, make lives easier, and help others succeed at their job. Customers will surely be running to your door to get their hands on it. This product will basically sell itself. Sorry to tell you, but this is just not true.
The reality is that even if you have a great product or service to offer people (which is definitely important), this isn’t the hardest part of creating business success. The hard part is what comes next – getting the word out there and convincing people to pay for this product/service in a scalable way.
This is customer acquisition.
Why is customer acquisition difficult?
The important thing to remember here is that a product or service is NOT going to sell itself. Even if this service will end world hunger, your team still needs to help people know that this service even exists, remind people there are others in need of food, and get in contact with them so they can make a deal.
Customer acquisition, involves a lot of planning and strategizing in order to convince prospects to buy from your company.
Ask yourself these questions:
- Who is our target audience?
- Where will we source data about them?
- How will we market our product/service to them?
- What is our social selling strategy?
- Who will be on the phones actually selling?
To be more specific, the most challenging part of starting a business is figuring out the cost of acquiring a customer – otherwise known as customer acquisition cost (CAC).
Customer acquisition cost
This is basically the amount of money you spend to acquire a customer. Calculating it and monitoring it will help you to optimize your sales and marketing plan to boost profits.
Below is a list of common cost pressures in customer acquisition.
- Sales and sales funnel
- Custom development
The number one reason why 50% of business startups fail is because they couldn’t get enough paying customers, and yet, so many companies today put little effort into figuring out their customer acquisition model.
CAC should always be one of the primary concerns in a company. What if some of your teams activities aren’t effective at all? You might be wasting money somewhere.
Costs can quickly get out of control if they are not kept an eye on. You also need to be sure that you are getting your money’s worth, and that you aren’t paying more to acquire a customer than you are receiving in return. So if I’m willing to spend $1 on getting a customer, I want to make at least $2 back in a sale. Of course, the lower the CAC, the better. If you spend more on customer acquisition than you can make money out of them, your business is not going to last that much longer. What’s great about calculating CAC is that it can empower you to optimize your business model. In order to effectively plan, implement and maintain a successful marketing and sales strategy, it is essential to know and monitor your customer acquisition cost.
Today, some of the most common methods of customer acquisition in sales and marketing plans are paid search, PR, SEO, inside sales, channel partnerships, etc. While these methods are effective, they are also just plain expensive. So figuring out where you can lower CAC will help you to make more money!
Ways to lower customer acquisition cost
Of course, there are many ways to do this, but here are two web marketing techniques that will help to lower customer acquisition cost:
Inbound marketing can be used to good advantage to get pre-qualified sales leads. Traditionally, marketing was done through paid ads, flyers, cold calling, spam — anything you had to pay for to catch the eye of potential customers.
Today, however, inbound marketing is all about producing and sharing content, both useful and insightful, that demonstrates what your brand is all about, and attracts those interested people who are likely to become future customers. Rather than cold calling a random list of people who are most likely uninterested in what your sales team are offering, web marketing can utilize search engines and social media to find and engage with people who are actually looking for your services or product. And by the time you actually reach out to them, they may already be set to buy.
Keep in mind though that inbound marketing is not easy. Your brand must consistently produce good content. Content that will genuinely intrigue your target audience. They also need to do proper SEO to be sure that they are correctly indexed and displayed for key search terms. Sharing valuable content that other sites, including social media sites, want to link to will further extend marketing reach at little or no extra cost.
Leveraging Social Media. No business can afford to ignore the power of social networks in today’s digital world. But hey, it is generally lower cost. It does, however, require a good bit of manual work to set up, maintain and monitor. If the content your marketers are creating is good enough, people are going to share it with others. With social media you can leverage the power of the crowd to get your name out there so your business can reach a far greater audience.
A note of caution with regards to social networking sites. It is not a platform where blatant advertising is welcome. In fact, sales pitches will put potential customers off interacting with your sales people and thus, your brand. It does take some consistent effort to join groups and interact with prospects, and it will definitely benefit your business to listen first, and then share links to your non-sales oriented content as a way to help, inform and pique their interest.
Don’t forget about your sales team’s greatest tool
The telephone is still the sales professional’s greatest tool. So much effort goes into effectively marketing your brand and attracting the attention of potential customers. But to turn these potential customers into actual customers, it is important to have your sales team on the phones selling. It is the most powerful device for customer acquisition when it comes to actually making and closing sales. Yet, many sales people are very vocal in their distain of cold calling. But the reality is that every year millions of people are buying on the phone. The phone is money, and everyone has one.
Of course, selling your service/product face to face is ideal and most effective, but that’s expensive and can cost as much as 8x more than making a phone call. Calls are instantaneous and powerful if you can get the right person on the phone and know how to use that time effectively.
So if you’re a business owner or manager, make sure you understand your customer acquisition cost so you can optimize your marketing and sales strategy and maximize profits. Customer acquisition and lead generation is not easy, it may be the toughest part of business – one that requires sufficient attention and consideration. Products and services don’t sell themselves. Because even with the greatest product and sales team in the world, a business will not last if nobody knows or cares about what it can offer them.