How to Reduce Customer Acquisition Cost?

The constant challenge that a company faces is the acquisition of new customers and leads. Resources are put to use to acquire new customers every day. In this daily effort to garner new customers it is important to ensure that the value of the number of resources spent is not greater than the value of the number of new customers acquired. To strike a balance between these costs and revenue is the real challenge. This article talks about how to lower customer acquisition costs so that this balance may be achieved. 

reduce customer acquisition cost

What does Customer Acquisition Cost mean?

The simplest definition of Customer Acquisition Cost or CAC is “the cost incurred to acquire a new customer”. This cost is the summation of the cost incurred in implementing marketing techniques, the salaries payable to marketing personnel, advertising costs, etc. The cost of every resource spent towards acquiring the new customer should be taken into account while calculating CAC. The formula to determine CAC is as follows;

CAC = Total cost of Marketing / Number of Customers acquired

Strategies to reduce Customer Acquisition Costs

Implementing effective marketing strategies is a necessity to acquire new customers. However, these strategies come at a cost and add to the CAC. It is important to know how to reduce customer acquisition cost while still obtaining successful results. Some of the proven strategies used by white label PPC agencies to reduce customer acquisition costs are as follows;

  1. Focus on the target audience
  2. Retarget potential customers
  3. Retain existing customers
  4. Partner with affiliate programs
  5. Assess content effectiveness regularly
  6. Optimize your product page with A/B testing
  7. Put in place an effective sales funnel
  8. Make use of marketing automation

Focus on the target audience

The first thing to do to reduce customer acquisition costs is to focus all the marketing resources towards the desired target audience. This will secure more engagement and leads as opposed to when a person outside your target audience is exposed to your marketing efforts. Research shows that around 83% customers will share personal data in order to have personalized interactions. Follow these simple steps to focus on your target audience;

  • Build a persona for your buyers
  • Investigate the data they provide
  • Encourage them to browse by exposing them to similar products
  • Facilitate buying by creating simpler processes
  • Assist them with excellent customer support

Retarget potential customers

Retargeting potential customers can increase conversion rates by a huge margin. Invest in collecting data on the preferences of customer who have added items to their cart but have not gone through with it. They have a higher chance of purchasing than those who have never even visited your company’s website. The costs incurred in convincing these customers who are on the fence to make purchases is much lesser as they already have expressed a desire to purchase. 

Retain existing customers

Research shows that a customer spends around 67% more when they purchase goods and services from the same company a second time. Retaining existing customers have proven to lead to a 25 to 95% increase in revenue. Convincing existing customers to purchase goods and services is easier than convincing new customers, as they already have a history with the company. Moreover, research states that acquiring new customers costs up to five times more than retaining existing customers. 

Partner with affiliate programs

Partnering with affiliate programs is a great way to lower customer acquisition costs. The influence of affiliate programs can be used to garner greater reach and engagement. This is a great strategy to reduce CAC as payment is commission-based and depends on sales made. It is a great way to gain more exposure without any upfront investment. 

Assess content effectiveness regularly

Engagement is indicative of successful marketing. And content put out by companies on various platforms form the basis of customer engagement with the company. It is, therefore, imperative that content put out be regularly assessed. Content that garners higher engagement should be published more often. This strategy does not require one to spend any more resources than are already present in order to acquire customers. 

Optimize your product page with A/B testing

Customer experience is key to customer acquisition. For this very reason it is important to work on bettering your website’s UX design. A/B testing can help optimize your product pages to create a better customer experience. A/B testing helps companies understand customer preferences when it comes to user experience and these changes can be implemented. This will reduce the pressure on other resources to acquire customers and help reduce customer acquisition costs

Put in place an effective sales funnel

Sales funnels direct customers towards purchasing the company’s products. The hallmark of a good sales tunnel is provision of ample information and insight into the preferences of potential customers. This information can help create specific marketing strategies and use resources effectively to reduce CAC. The stages in an effective sales funnel are as follows;

  • Awareness of company
  • Discovery of specific product of service
  • Evaluation of company and products offered
  • Intent to purchase
  • Purchase
  • Loyalty reflected by repeated purchase

Make use of marketing automation

Making use of marketing automation will reduce the manpower required to acquire new customers. This will save the company a lot of expenses like infrastructure for marketing personnel, salaries, training costs, etc. Some of these techniques include automatic email blasts being sent to customers who have subscribed to the same. Marketing automation has proven to result in higher conversion rates and reduced customer acquisition costs.  

Conclusion – reduce CAC without compromising customer acquisition

The success of a company lies in striking the balance between the costs incurred to acquire new customers and the value offered by the customer. White label PPC agencies can help you lower your CAC while maintaining a high rate of customer acquisition. The money saved when the CAC is reduced can be used for other business needs, so that marketing alone does not leave the company resources crippled.

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Article Author Details

Thomas Wilson

Thomas Wilson is the representative of PPC Outsourcing USA. I am also a content strategist and like to share my insights in digital paid advertising.