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  • ROI in Marketing: Customer Acquisition Cost Explained (in 800 words)

Last updated on May 18, 2023

Every business owner knows that the highest cost to a business is acquiring a new customer.

And in the last five years, the cost has increased by over 50%.

Whether you realize it or not, digital advertising is a part of our everyday lives. 

Marketing has become more expensive, customers are becoming less trustworthy of brands that blast ads with promotions and companies should just suck it up… right?

The first two are unfortunately correct. But the last one doesn’t have to be you. Companies shouldn’t give up. They should simply get SMARTER.

So if you’re looking to maximize each dollar you spend, you’re not alone.

What is Customer Acquisition

It’s important to businesses of any age, size and sector. It allows your business to 1) make money to meet costs 2) reinvest in growth 3) not overspend on acquiring new customers 4) determine if it’s worthwhile for you to continue said activity.

At this point, you might be asking “what’s the difference between lead generation and customer acquisition?” Well, let’s break it down a little…

In the marketing world, we visualize the customer journey into a funnel or stages in the buying process.

To put it simply, lead generation happens at the top of the funnel. Lead acquisition happens in the middle of the funnel and lead conversion happens at the bottom of the funnel. And customer acquisition refers to this funnel as a whole.

Why Is It Important

When it all comes down to it, you know how to price your stuff.

Picture this: You are the owner of a fitness centre. You hold corporate group classes, personal training and rehab sessions. All three are different demographics.

  • How much should you be pricing your services?
  • Can you give a discount?
  • And let’s say you want to run ads. How much can you afford to spend to get 1 new enquiry and how much do you need to get that person to become a paying customer?
  • Where should you focus on first? 
  • Should you have a free trial?
  • Can you give your staff more commissions for each sale?

When you know your acquisition cost, you know exactly what to do and which makes the most sense. Get what I mean now?

How to Calculate Your Customer Acquisition Cost

If there’s a cost to something, marketers probably have an acronym for it. 

You may already know acronyms like CPC (cost per click), CPM (cost per million impressions), CPL (cost per lead), CPA (cost per acquisition), ROAS (return on ad spend) that describe the different metrics you can track in your ad campaign.

It’s important to know what each acronym stands for and more importantly, what they mean for your business.

Customer Acquisition Strategies

  • Content Marketing
  • Social Media Marketing
  • Search Marketing
  • Email Marketing
  • Messenger Marketing

How to Minimize Your Acquisition Cost

Here’s the simple truth about marketing. Heck, anything in life: You can always do better.

You can always reach new audiences, maximize revenue per transaction, build a stronger brand presence, streamline your resources, minimize associated costs, the list goes on.

  1. Improve your website conversion efforts

Enhance your calls-to-action, ensure you’re mobile and tablet responsive, optimize your landing page. If you can tighten up your copywriting, do that. Constantly split test your creatives, placements, headlines etc. 

All these will make sure you’re performing at your best and you can get the most out of any customer acquisition method you’re employing.

  1. Boost your Customer Lifetime Value (CLV)

This may be in the form of bundling, upselling or cross-selling. 80% of business profits usually come from 20% of their customers. With existing customers, they already see your value.

There are only three ways any business can make more money; 

  • Get more customers (which we agreed has the highest cost)
  • Encourage existing customers to spend more
  • Have them to spend more frequently
  1. Adjust and Optimize your strategy

Take some time to rework your Customer Value Journey and optimize your business activities at each stage. Evaluate to see what is costing you most, where you could cut back and what other channels you can invest in to see the same results. 

If you need someone to talk to about this, book a free session with us. We’re happy to walk you through this 🙂