The Essential Guide to Customer Acquisition
Without new customers, businesses cannot survive, let alone grow. In this guide, you’ll learn how to acquire more new customers for your business. Here’s what we’ll cover: What is customer acquisition? Create a customer acquisition strategy Customer acquisition...
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Customers are the lifeblood of any business. Without new customers, businesses cannot survive, let alone grow. In this guide, you’ll learn how to acquire more new customers for your business. Here’s what we’ll cover: Customer acquisition is the process of gaining new customers for a business. Customer acquisition is not a “one-step” process. Most prospects don’t turn into customers instantly. Instead, they follow a journey: So, in order to acquire new customers, you need to align your marketing with these three stages. Customer acquisition isn’t about executing a variety of tactics and hoping one sticks. You need a strategy, i.e., your battle plan. This is how you’re going to attract new customers and choose the right acquisition tactics. Here’s how to create a customer acquisition strategy. If you don’t know who your customers are, you can’t attract more of them to your business. That’s why the first step of your customer acquisition strategy is to figure out who your ideal customers are. If you’ve done your market research and created customer personas, then this should be easy. You’ll already know who you’re trying to reach. For example, here’s a simplified version of our ideal customer at Ahrefs: If you’re still in the early stages and don’t have a customer statement like this yet, don’t worry. You can use this guide to create one for your business. Knowing who your ideal customers are will also help you figure out which marketing channels you should use. For example, we know website owners who desire more traffic are often searching on Google and looking for helpful guides. This is one of the main reasons why SEO-driven content marketing is our main marketing tactic. Experienced SEOs tend to hang out a lot on Twitter too, and that’s why we have a heavy presence there. For your strategy to work, you need to know your destination. That is your goal. Ideally, you should have goals for each stage of the buyer’s journey. But in reality, most companies have limited manpower, time, budget, and resources. So attempting to achieve goals for each stage may prove to be difficult. In that case, you’ll have to prioritize. I suggest focusing on the area where you’re lacking the most currently. For example, perhaps you may have a lot of traffic coming to your website (awareness). Yet you aren’t seeing any substantial increase in your sales (purchase). As such, you may want to set a goal and tackle the “problem area.” Once you’ve identified what you want to work on, you should set a SMART objective to make it clear what it is you want to achieve. For example, this is a good objective aligned with the SMART criteria: Based on what you’ve designed so far in your strategy, you should have an idea of which channels may work best to acquire new customers. Pick one to two of the most suitable ones and begin experimenting with them. (More about the different channels in the next section.) Here are some of the most popular customer acquisition channels you can experiment with for your business. SEO is the practice of optimizing a website or webpage to increase the quantity and quality of its traffic from a search engine’s organic results. Content marketing is the process of creating and distributing content to attract and retain customers. Digital advertising is the process of paying a website or platform to reach its audience via ad space. Influencer marketing is the practice of working with influencers—people who have an active, sizable audience—to promote your brand’s message, products, or services. Email marketing lets you reach your prospects’ mailboxes with messages that either prompt direct action or aim to encourage prospects to create a long-term relationship with the brand. Video marketing is the process of creating and distributing video content to attract and retain customers. Social media drives traffic to your webpages and creates engagement with your brand by means of social media platforms. A referral program incentivizes existing customers to promote your brand to their family and friends. Here are some examples of how different businesses have acquired their customers. Ahrefs is an all-in-one SEO toolset that allows you to do keyword research, competitor analysis, website audits, content research, rank tracking, and more. The main customer acquisition strategy we use at Ahrefs is SEO-driven content marketing. Here’s how we do it: First, we find topics that our target customers are searching for on Google. As mentioned earlier, our customers are often searching on Google for solutions to their problems. This makes SEO an ideal acquisition channel. Ranking high on Google also ensures that we get passive, organic traffic, as long as our content stays on top. How do we find these topics? As you can see, there are over 180,000 topics to choose from. We’ll eyeball the list and note down those that are relevant to our customers. Once we have a list of topics, we decide which topics to target first using business potential. We start with topics that have a score of “3,” then “2,” and so on. With a list of topics to work on, we create content based on this framework: Circles.Life is a digital telco based in Singapore. Despite entrenched competition from the three existing major telcos in Singapore, Circles.Life has managed to succeed. (I, too, am one of its customers.) One of the main ways it acquired its customers (at least in the early days) was via its referral program. In fact, according to HireDigital, over 40% of Circles.Life transactions come from referrals. The success of a referral program depends on a few factors, but the main one is the incentive. An attractive incentive motivates customers to share; a bad one drives no action. In this case, Circles.Life’s referral program succeeded because the prize was exactly what telco customers wanted: more data for low prices. This is reminiscent of Dropbox’s referral program, which was also one of the main ways the cloud storage company acquired its first customers. Recommended reading: How to Choose the Right Referral Incentives for Your Referral Program (With 20+ Examples!) Luxy Hair is an online store that sells hair extensions and hair-related accessories. With over 3 million subscribers on YouTube, it’s killing it. Luxy Hair makes videos that get thousands, if not millions, of views. Each video features different ways of styling hair, taking care of it, and more. And each video—ding ding ding, you guessed it—features Luxy Hair’s own products. The company then makes it easy for any viewer or subscriber to buy by including the relevant links in the video description. Recommended reading: The Four-Part Formula That Got Luxy Hair 2.8 Million Subscribers on YouTube Here are some frequently asked questions related to customer acquisition. Customer acquisition cost (CAC) is the average amount of money you spend to acquire a single customer. This is calculated by dividing your customer acquisition expenses by the number of acquired customers. For example, if you acquired 10 new customers after spending $1,000 on your marketing, your CAC would be $1000/10 = $100. According to Shopify’s research, here are the average CACs by industry: Don’t take these benchmarks as gospel. These numbers are averages and can differ depending on your brand, exact market, average order value, and more. You should always relate your CAC to your own business. Many businesses calculate the CAC because they want to lower it. However, trying to reduce your CAC in isolation is not a good idea. Most of the time, reducing your CAC and being more effective in marketing don’t necessarily go hand in hand. If your CAC is too low, you may actually be limiting your exposure and under-spending on your marketing activities. Your balance sheet may look good in the short term, but you may be missing out on substantial growth opportunities in the long term. So, rather than strive to pay as little as possible, aim for marketing effectiveness. To do this, you should use CAC in relation to your customer lifetime value (CLV). This is a metric that estimates how much money an individual customer will spend on your products or services. Here’s how CLV is calculated: Take this into account, alongside your customer base growth and overall marketing effectiveness, when deciding if you should adjust your CAC. Recommended reading: How to Use & Reduce Customer Acquisition Cost (CAC) Customer retention happens after a customer is acquired. The goal of customer retention is to keep your customers with your brand for a long time. This is because a loyal customer is more valuable to a business. Not only will they buy more (and buy more frequently), but new customers are also often more expensive to acquire. Customer acquisition and customer retention are not mutually exclusive. Both are important to a business’s growth and survival and should exist at the same time. Some marketers even argue that customer retention should actually take precedence over customer acquisition—after all, there’s no point filling a leaky bucket. 7. Focus on retention first, not acquisition. Retention drives acquisition. Retention gives you a competitive edge > Retention drives referral > referral drives word of mouth > word of mouth is a powerful acquisition channel. Retention gives you MOAT to acquire more customers. Recommended reading: What Is Customer Retention? 11 Examples and Strategies to Retain Customers Besides CAC and CLV, which metrics should you measure? This depends on the exact tactic you’re using. I recommend reading the guide below for a sample of the most important customer acquisition metrics you should be tracking. Recommended reading: 25 Marketing Metrics You Should Consider Tracking If you want to acquire new customers on a consistent basis, you need a strategy. Create one and then execute only the tactics that move your business ahead. Did I miss out on anything important about customer acquisition? Let me know on Twitter.
1. Identify your customers and where they hang out
2. Set your goals
3. Choose your customer acquisition channels
1. Search engine optimization (SEO)
Pros
Passive, organic (almost free) trafficEvergreen and compounding effects; article written a few years ago can still generate traffic if it ranks high on the search enginesPotential customers are automatically qualified by their search intents, e.g., someone searching “ahrefs vs moz” is closer to buying than someone searching “how to increase website traffic”SEO content can influence entire marketing funnelCons
Ranking high on search engines takes timePopular terms can get competitive (i.e., lots of time and resources required)Return on investment (ROI) can be difficult to measureSlower effects for newcomers; website with smaller number of high-quality backlinks and low topical authority may find it tougher to rank higher in the beginning stages2. Content marketing
Pros
Educates potential customersBuilds loyalty and retentionCan go viral in the short term and create a lot of attention and awareness at onceBuilds credibilityCan be the basis of other marketing channels (e.g., digital advertising)Cons
ROI can be difficult to measureRequires time to workContent needs to be promoted and distributed; otherwise, attention may be scarceContent must be high quality; otherwise, it can’t stand out from the tons of other published content3. Digital advertising
Pros
Fast way to get traffic; just set up an ad and get it running in a matter of minutesHighly specific targeting (geography, age, gender, interests, etc)Easy to measure and scaleCons
Can be expensive (especially when scaling up)Learning curve exists; costs time and money to figure out what works for your exact businessSuffers from symptoms like ad fatigue and banner blindnessIncreasing use of ad blockers and third-party cookies blocking by web browsers may affect measurement and effectiveness4. Influencer marketing
Pros
Good way to improve brand awarenessPopular influencers can “bestow” a halo effect on your brandCan generate direct sales, e.g., via influencer-specific discount codesCons
ROI can be difficult to measureNo guaranteed returns when working with influencersRisk of unwanted brand associations if you work with the wrong personLimited control over creative or messaging5. Email marketing
Pros
Easily reach your prospects or customers directly (and at any time)Emails sent can be highly personalized and segmentedEasy to measureCons
Takes time to organically build a quality email listOverdoing it can cause you to break email marketing legislation (GDPR, CAN-SPAM, etc)Can be competitive (people’s inboxes are flooded with emails!)6. Video marketing
Pros
Great for demonstrating how a product worksCan be later repurposed into other content formats (e.g., your script can be turned into a blog post; main video can be turned into multiple, bite-sized versions)Engaging videos can capture and retain attention much more effectively than other formatsCons
Very resource-intensive to produce one high-quality video, let alone many7. Social media
Pros
Organic, almost free trafficMassive audiences can be found on different social media platformsCan interact directly with your audienceCons
Not easy to build a following on social mediaSocial media platforms may decrease your organic reach (to get more people to pay for ads)May be at “mercy” of these platforms; you can get banned or removed anytime, which means losing all your followingMay experience many negative comments and trolls8. Referral programs
Pros
Can be a low-cost way to acquire new customersBuilds customer loyaltyCons
No guarantees that a referral program will workCan’t “force” your customers to refer their friends1. Ahrefs – Content marketing
2. Circles.Life – Referral program
3. Luxy Hair – Video marketing
How do you calculate customer acquisition cost?
What is the average customer acquisition cost?
Why is customer acquisition cost important?
What is customer retention?
How do you measure customer acquisition?
Final thoughts
