What does customer acquisition management look like in 2020?
In 2020, business owners across every industry faced an unprecedented set of challenges due largely to the global pandemic. Smaller businesses have been hit especially hard by lockdowns and other pandemic restrictions. While most large enterprise companies have the resources to weather an economic downturn, smaller companies are often forced to take more drastic measures — such as laying off staff and discontinuing certain products and services — just to survive.
In these challenging times, building a customer acquisition strategy may be the last thing on a small business owner’s mind. But in many ways, the time to reach out to potential customers couldn’t be better. In the era of COVID-19, many customers have relied heavily on SMBs such as restaurants, grocery stores, and eCommerce sites to get the goods and services they need. Putting a customer acquisition strategy in place now can help build customer loyalty over the long haul. This guide aims to help small business owners do just that — gain the knowledge and tools to attract new customers — so they can survive and thrive even in times of extreme uncertainty.
First things first: What is customer acquisition management?
Customer acquisition is the process of turning prospects into customers. Customer acquisition management relies heavily on campaign creation, tracking, and reporting tools that quantify the effectiveness of promotional activities. In other words, it helps companies understand how (and if) their marketing activities affected prospect conversion rates. One of the main ways companies measure the success of any campaign or strategy is by calculating the Customer Acquisition Cost (CAC), which is the cost of acquiring the customer compared to lifetime value (how much the customer spends over the course of the relationship).
How to calculate CAC
Calculating CAC may vary depending on the size of the company. In general, CAC is determined by adding up various marketing costs such as wages for marketing and sales teams, software expenses, ad sponsorships, online and traditional marketing campaign costs, outsourcing, and other overhead. That number is then divided by the number of customers acquired to determine the CAC. For instance, if a business spent $5,000 on marketing activities and acquired 50 new customers, the CAC would be $100.
Why it’s becoming harder to control CAC
According to one marketing analyst, the cost of acquiring a new customer can range anywhere from five to 25 times more than retaining a current customer. Smaller companies may feel especially hard hit by the struggle to stay relevant in a noisy digital marketplace. They’re also pressured to justify the return on investment (ROI) for their marketing spend, which is becoming an almost impossible goal. This is because CAC is rising exponentially for several reasons, including:
Customer churn. Churn happens when existing customers end the relationship with a company, whether it’s to cancel a membership or subscription, close an account, or simply decide, for whatever reason, to buy products and services from a competitor. Some customers may simply shop around looking for free samples of products and services without any intention of becoming a long-term customer. This is why customer onboarding and follow-up is key to building long-term customer relationships (and can also help weed out those just looking for “freemiums”).
Loss of customer trust. Loss of trust can contribute to churn, and many customers may feel cynical or distrustful of companies in general. However, a customer may decide to leave a particular company due to a poor experience, failure of the product or service, or a data privacy breach.
The Internet is really not a democracy. Screen real estate is increasingly dominated by sponsored content. This means that larger companies with bigger budgets can easily outspend smaller companies and get more of their content in front of prospects. However, there is good news. A good content marketing strategy can help even the smallest businesses compete with larger companies to close the gap between paid sponsorships and free content distribution.
Distrust of salespeople is at an all-time high. Although this can vary by industry, prospective customers increasingly do their own research to compare products and services between companies before ever contacting them. Sometimes simply reading customer reviews is enough for a prospect to decide how or whether to proceed with a dinner reservation, landscaping consultation, or a software trial. As the traditional sales pipeline erodes, so does the ability of a company to accurately forecast CAC.
The difference between customer acquisition and customer retention
Some analysts argue that companies spend far too much money and energy on customer acquisition at the expense of customer retention. After all, it’s well known that customer retention is much cheaper and easier than customer acquisition, so why not focus more on that? While it’s true that customer retention costs less overall, it is by no means effortless. Companies must come up with cost-effective strategies to minimize churn, build their customer base, and increase lifetime customer value through upselling, cross-selling, loyalty programs, upgrades, and more — but without driving away existing customers through pushy overselling. Customer acquisition and retention are entirely different categories altogether, and they require different strategies. Therefore, companies shouldn’t sacrifice one for the other: Customer acquisition is necessary for business growth and customer retention helps take it to the next level.
The customer acquisition process: Key strategies for digital marketing
When thinking about customer acquisition, every business should first know who they are trying to acquire. Typically, the initial business plan will have already defined buyer personas based on demographic traits such as age, gender, location, income level, education, family status, and more. Understanding the buyer persona is not only critical to various business decisions, this insight is essential to developing a marketing plan. The customer acquisition process uses information gathered from buyer personas to usher the customer journey through three high-level phases:
- Awareness. This is the initial stage when a prospect first learns about a company and the products or services it offers. This can be through a targeted brand awareness campaign or through the individual’s own research over a period of time.
- Consideration. This is the stage when a prospect adds a company to the list of contenders. For instance, in a Google search for Italian restaurants in New York City, a prospect might consider one they’d never heard of before due to customer referrals on sites like Yelp or through recommendations by social media influencers. Both the Awareness and Consideration stages can be ongoing for months or even years. For instance, a company may attract followers through a Facebook ad even if those followers never become paying customers.
- Decision. This doesn’t just involve a one-time purchase or subscription. In today’s highly competitive marketplace, customers may leave (or stay) for a variety of reasons. For instance, a great (or terrible) customer experience can be the difference between a lifelong customer and one who loudly trashes a company to anyone who will listen.
Customer acquisition marketing strategies
Customer acquisition marketing strategies help streamline the customer’s journey through these three phases, from Awareness to Decision. Traditional approaches involve a wide range of media such as cold calling, sponsorships, and advertising across TV, print, direct mail, and radio. For smaller companies, digital advertising has helped to level the playing field by providing affordable media options that can be highly targeted and widely distributed without the high costs of traditional media. These include email, social media, video, and content marketing through online articles, blogs, webinars, case studies, and more.
Content marketing: Blogs, eBooks, Webinars, Case Studies, White Papers
Content marketing is a highly effective and often affordable strategy for smaller businesses. Blogging is a great way to attract the right customers, and small business owners and their employees can write about almost anything such as industry trends or new services. Blogs also enable businesses to engage prospects and customers through content sharing and discussions. Note that the key to a successful blog is regular, quality content. Adding a blog to a website is easy, but keeping it updated and relevant takes time and planning. Far too many businesses start a blog and then abandon it after a few posts. This can actually do more harm than good, as an abandoned blog can make a business look outdated, disengaged, or even defunct.
Other types of content such as eBooks, webinars, and case studies may not be relevant to all industries or suitable for all budgets, but they can offer valuable reference material for the right audience. This type of gated content can also enable businesses to capture prospective leads and follow up with offers of additional content or promotions at a later time.
Video is a great way to engage with a target audience, and today’s affordable digital technologies make high-quality digital video production more accessible to smaller businesses. Videos can be a great way to attract new customers and deepen relationships by offering inspiration and know-how. For instance, a garden store could produce a short video that showcases various tools and how to use them. Although video costs can run high, even a novice can produce a useful video on a smartphone or relatively inexpensive digital camera. As long as videos are well thought out and scripted, they can be a great way to engage with an audience — even if they’re not blockbuster quality.
Social media marketing is a great way to distribute valuable content through either organic or paid methods. Although organic social media posts (think viral videos) can feel like shouting into an abyss, those that are well planned and executed can reap huge benefits. However, many companies ultimately turn to paid social media, which is typically more successful at getting the right content to the right audience without spending months or years trying to build up a following.
Search Engine Optimization (SEO) and Pay-Per-Click (PPC)
Innumerable guides and articles exist to help companies ensure their SEO marketing efforts are successful. Like social media, these can also be organic and paid. SEO works to help an audience find relevant content, so optimization is critical to connecting an audience with the content they want. Of course, that’s easier said than done, which is why SEO methods have evolved over the years (and why we can’t cover them all here).
For this reason, many companies go the PPC route. PPC is paid search marketing that allows the user to create a search result and then pay for it to show up next to organic results — and thereby increase the chances of being found by their target audience. But developing a successful PPC campaign requires much more than just coming up with some keywords and entering a credit card. Keywords need to be well researched and organized, and landing pages need to be well crafted to convert leads. So PPC isn’t just a way to avoid “harder” organic methods. It takes planning and research to ensure PPC dollars are invested wisely.
Email is definitely not dead. In fact, it remains one of the top ways companies keep in touch with prospects and customers after they’ve collected their information. Email is actually a great way to deliver customized content to customers through targeted promotions, announcements, discounts, events, and more.
While email marketing has several advantages, people everywhere are constantly overwhelmed by the number of messages in their inboxes. So there’s no guarantee that the message will be seen. That’s why, like all of the other strategies mentioned, email communication must be well crafted with relevant, compelling subject lines, clean design, and concise copy. The goal is to make it easy for the user to take a single action, such as clicking on a free shipping offer, donating to a specific cause, or learning about a new product that might interest them.
Recommendations from trusted friends and other sources is one of the number one ways to acquire new customers. These trusted sources can include social media contacts, neighborhood email lists, local Yelp listings, and more. Small businesses can incentivize happy customers through referral programs and other promotions. You can learn more about word-of-mouth-marketing and how to create an impactful strategy in this article.
What to look for in a customer acquisition solution
Many small business owners can feel overwhelmed by marketing. That’s totally understandable, because most SMBs didn’t go into business for the love of marketing. They did it to pursue a passion or a dream. As a result, small companies that are newer to customer acquisition marketing may not fully grasp the customer journey, or even the basics of lead generation, so they don’t know how to craft a strategy.
Fortunately, there are software solutions available that can help even first-time marketers develop and execute highly targeted campaigns and track the conversion of potential leads into loyal customers. For both novices and seasoned marketing teams, here are a few things to look for in customer acquisition tools:
Software-as-a-Service (SaaS) option: In the world of small business, one size definitely does not fit all. Flexibility is essential. Subscription-based SaaS solutions that offer pay-as-you-grow options ensure small businesses pay only for the capabilities they need. Later they can add on services and capabilities as business needs grow and demands change.
Customer relationship management (CRM) and marketing automation: Historically these solutions have been built with enterprises in mind, but modern CRMs can take advantage of SaaS deployments to lower costs and provide enterprise-grade functionality to companies of all sizes. Today there are more solutions aimed at smaller businesses to help them get up and running quickly. Look for features such as an intuitive, user-friendly interface that can be easily customized without the need for expensive backend development.
Multiple integrations: Many businesses use various third-party apps and cloud suites like Microsoft Office 365 and G Suite. A well-rounded CRM solution should support these tools and other popular third-party apps.
Extensive template library: Smaller businesses typically lack time, money, and in-house designers to create unique templates. That’s why a customer acquisition solution should include a pre-built email template library and HTML editor that can be customized on the fly.
Surveys: Customer and prospect surveys can provide valuable insight into what’s working well (and what’s not). Surveys can help gauge the likelihood that customers will recommend a product or service to a friend, or assess how well customer support resolves issues.
Social sharing: No customer acquisition solution would be complete without the ability to easily share content such as videos, blog posts, emails, eBooks, and other content across multiple social media platforms like Facebook, LinkedIn, Twitter, and Instagram.
Languages supported: The world is much smaller today, and even the smallest businesses may have customers in countries around the globe. A customer acquisition solution should provide support across multiple languages including English, French, and German (at minimum).
Free trial: Even if a solution checks all of the boxes on paper, the only way to really test it out is through a free trial. The trial should include all tiers — from basic to advanced — because business owners should be able to ensure all features will work for them as their business grows.