What Is Customer Acquisition?

what is customer acquisition

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What is a business without customers? In every industry, most companies use intricate strategies to bring potential customers into the fold. The practice of building a strong, sustainable customer base is called customer acquisition, and it’s a primary way that businesses approach achieving growth and increasing profitability. Read on to learn all about what customer acquisition is, how it works, how to measure it, and why it’s important.

In this post, we’ll cover the following:

What is customer acquisition?

How does customer acquisition work?

How do you measure customer acquisition?

What is customer acquisition?

Customer acquisition is the process of turning prospective buyers into customers through measured strategies and techniques. Instead of randomly hoping that consumers become customers, developing a customer acquisition strategy allows companies to plan for sustainable growth by taking maximum advantage of their inherent strengths. Because customer acquisition (also known as client acquisition or user acquisition) typically unfolds in stages, it’s often visually represented as a funnel. Across the funnel, companies nurture leads into prospects and encourage prospects to cross the finish line and become customers. These are the main stages of the customer acquisition funnel:

  • Awareness: At the top of the funnel, companies are focused on building brand affinity and generating awareness within a target audience in order to identify leads. From its widest point, the funnel narrows as those with a potential interest to buy progress to the next stage.
  • Consideration: In the middle of the funnel, companies interact with prospects that have registered their interest in some way, like engaging on social media or signing up for a mailing list. Encouraging that interest helps inspire prospects to make a purchase.
  • Purchase: At the bottom of the funnel, the priority is providing prospects with whatever they need to fully become customers. Companies might offer a discount code to someone who adds a product to their cart, for example, or otherwise entice them to buy. Other models might use the bottom of the funnel to prioritize actions that drive leads, like encouraging sign ups for free services, for example.

How does customer acquisition work?

All the marketing efforts companies put toward selling their products can factor into customer acquisition strategies. With a defined audience and a clear picture of business goals, companies can design custom strategies that support their long term success. Many companies opt for a mix of customer acquisition channels in order to diversify their efforts and maximize their return on ad spend, or ROAS. Here are some of the activities and elements that can support customer acquisition:

  • Paid advertising: While advertising in general can help build an audience, running targeted ads online can help companies reach the right audience at the right time.
  • Social media marketing: Social media marketing works because most consumers are already using these platforms to discover, connect with, and shop the brands they love.
  • Influencer marketing: Partnering with influencers is a shortcut to building trust; consumers follow the online personalities that represent the lifestyles they share or aspire to.
  • Affiliate marketing and referrals: Offering affiliate commissions and referral bonuses can turn a company’s most passionate customers into brand evangelists.
  • Content marketing: Blogs can help companies form more meaningful connections with prospective customers by telling their brand story, sharing their values, etc.
  • Email marketing: Sending targeted emails that respond to specific actions (like cart activity, browsing history, etc.) gives prospective clients a personalized, 1:1 experience.
  • Search marketing: Strategies like search engine optimization help ensure that a brand is displayed front and center when a potential customer searches for something related.

How do you measure customer acquisition?

Measuring customer acquisition allows companies to refine their strategies and more effectively move consumers through the funnel. The primary metric to consider in this field is customer acquisition cost (CAC), which is the amount companies need to spend in order to acquire a single new customer. Measuring CAC requires companies to consider every single expense that leads toward acquiring a new client. Put simply, CAC is measured by dividing the amount a company spends on marketing by the total number of customers they acquire. 

On a more granular level, measuring each specific channel or campaign independently is a good way to determine which customer acquisition efforts are most profitable. Some channels might be worth the required investment, while others might be less effective. Measuring CAC in this way helps companies discover what works and what doesn’t so they can allocate budgets effectively and adjust their strategies wherever necessary.

Customer acquisition costs for the direct to consumer market (CAC DTC) can vary greatly based on a number of factors. Different industries experience a range of average CAC levels, for example, and big picture metrics like customer lifetime value (referred to as LTV, CLV, or sometimes CLTV) are also an important factor. The average time someone remains a customer (customer life span), the propensity for customers to purchase more than once (customer retention), and the average amount each customer spends over their “lifetime” all add weight to CAC calculations. 

In other words, CAC measurements are not all created equal; paying a high price to acquire a new client may make good business sense if you can predict that individual is likely to become profitable over the course of their lifetime as a customer.

Customer acquisition or CAC marketing is a performance-driven approach. Using data about both input (marketing spend) and output (customers acquired) keeps companies focused on real business results. The CAC metric ties directly into ROAS, because analyzing the cost of acquiring new customers enables marketers to achieve greater returns based on that understanding. For companies to know whether or not their efforts are yielding worthwhile results, data-based strategies and performance metrics like these are absolutely critical.

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