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Customer acquisition cost is a crucial metric every B2B organization wishes to bring down. After all, low customer acquisition cost means you’re spending less money to generate the same revenue.
However, the question is, how to effectively reduce it? Well, that’s what the blog is all about.
This blog talks about six practical and actionable tips to bring down your customer acquisition cost. You just need to implement all the tips correctly, and you’ll eventually notice the difference.
CAC or customer acquisition cost is all the money a company spends to acquire a customer. This includes everything from the salaries of the sales and marketing employees to all the marketing & advertising costs that made customer acquisition possible.
While there are several ways of calculating customer acquisition costs, here’s a simple one:
Customer acquisition cost or CAC: Total cost of sales and marketing in a given time/ total number of customers acquired during that period
Let’s say the total cost of sales and marketing for one year was $1,000,000. And during that time, you acquired 5000 customers. So, according to the customer acquisition cost formula, the CAC would be $200 ($1,000,000/5,000).
On its own, CAC is just a metric that businesses wish to reduce. To add more meaning to CAC, you must compare it to CLV or customer lifetime value.
Customer lifetime value is the total amount a customer spends with a business during their relationship.
Customer Lifetime Value = Average Purchase Value * Average Purchase Frequency * Average Customer Lifespan
Let’s say $15 is the average purchase value, purchase frequency is once a month, and the average customer lifespan is 8 months. Multiplying all of them would give you $120 (15*1*8). So, you earn $120 from a customer during their relationship with your organization.
Comparing CAC to CLV, you’re spending $200 to acquire a customer and earning only $120. This comparison adds value to CAC and reveals that you’re spending more than you’re earning. And this also shows that you must work on reducing your customer acquisition cost. So, let’s jump right into it.
Lead generation is crucial in determining whether your customer acquisition cost will be higher or lower.
For instance, if your lead generation tactics aren’t targeted and are focused on a pretty wide audience (targeting everyone), you’re more likely to generate low-quality leads.
Low-quality leads are the ones that have a low intent to make a purchase. Because of this, marketing and sales teams have to put more effort into more lead nurturing campaigns to convert them to customers. Even after putting in so much effort, most low-quality leads never convert. This spikes customer acquisition costs.
On the other hand, if your lead generation tactics are more focused, i.e., you have a decent buyer persona and know who your target audience is, you can generate quality leads.
Quality leads are the ones who’re more likely to make a purchase. Unlike low-quality leads, your sales and marketing team can convert such leads without spending as many resources. And this significantly reduces your customer acquisition costs and also boosts conversions.
Pro Tip: Generating quality leads can be quite a task. If you’re busy addressing your existing customers and other daily operations, hiring a lead generation expert like DAT-A-CCURATE would be a sound decision. They can help you get both quality and qualified leads, which will eventually lower your CAC.
Attracting organic traffic to your website is perhaps one of the best ways of reducing your customer acquisition cost. The concept is simple; the more visitors come to your website organically, the more conversion you’ll get (without paying much).
For more organic traffic, you need to first work on your SEO. You can find the keywords your competitors are ranking for and include the same in your website (blogs, articles). This will rank your site higher on google search results bringing in more visitors.
Another thing that you can do is develop quality content or distribute the content that already exists on your website (blogs, eBooks, infographics. videos, articles) across relevant channels. This way, more people will know about your business, and they’ll land on your website, increasing visitors and leads and eventually reducing CAC.
You cannot just attract prospects to your website and expect them to share their contact info. To make that happen, you’ll need an attractive sales or landing page and quality lead-capturing popups.
However, before that, you need to assess what’s the problem. For instance, are the popups boring, is the landing page copy bland or unclear, or is the CTA the issue? For that, you can run A/B tests and analyze different variants. After you’ve found what’s wrong, you can work to improve the same.
Improving your landing page would ensure more and more visitors get converted into leads and then into customers reducing the CAC.
Account-based marketing enables businesses to focus on a set of target customers in a given market. You can use buyer intent data (tells about which buying stage a prospect is in), firmographic data (company size, industry, nature of business and decision maker information such as email, phone number), and technographic data (technology stack of the prospect) to create ideal customer profiles and then target your prospects in a hyper-personalized manner.
When you target your customers using personalized campaigns, your sales cycle shortens, and you have to put in less effort to convert the prospects. And this reduces the overall money spent on customer acquisition.
Pro Tip: While you can get firmographic data easily, buyer intent and technographic data are hard to accumulate. So, try reaching out to a reliable lead enrichment company such as DAT-A-CCURATE. We can help you create superior ICP using technographic, firmographic, and buyer intent data.
DAT-A-CCURATE can also provide you with MQLs (marketing qualified leads) or SQLs (sales qualified leads), which your respective teams can act on, saving you time and money.
Most B2B firms/companies are well aware of the three stages of a customer’s journey:
– Attract
– Convert
– Close
Surprisingly enough, they ignore the fourth and perhaps the most important stage: Delight. Delight is the stage when you ensure that your customers are getting all they need, such as technical support, required training, and weekly newsletters (educational or promotional).
When you focus more on delighting existing customers, you build a relationship that motivates them to stay for longer. And when the customers stay for longer, you’ll get more opportunities to sell (cross and upsell) and achieve better customer lifetime value.
Moreover, if your customers are happy, they’re more likely to refer your product/service to their peers. You can even ask them to post video-based customer testimonials, which go a long way in motivating your prospects to make the purchase.
In a nutshell, by delighting your customers, you can increase the customer lifetime value and generate more leads. And as the leads will come from referrals or by viewing the testimonials, they’ll be high quality and with a higher intent to convert, which again helps reduce CAC.
Pro Tip: If your customers are hesitant to offer video testimonials try offering them gift vouchers. Or you can even let them try a service for free.
Some tasks, such as outbound calls, require dedicated manual resources. But that’s not the case with sales and marketing campaigns. Using sales and marketing automation tools, you can do the job in less time, without error, and at a fraction of the cost.
For instance, if you have to send thousands of emails, instead of delegating this task to your team, you can go for automated drip mail campaigns. Such emails get automatically triggered after a set action is triggered, saving you time, effort, money, and of course, customer acquisition costs.
While the aforementioned tips will definitely help you reduce your customer acquisition, it won’t happen in a day. You need to gradually implement all of these tips for a few months, maybe a year, before expecting substantial results.
You can simply calculate the CAC for this year and start implementing these tips. And after a year or so, you can measure the CAC again a year after and notice the difference.
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