Understanding customer acquisition
As a business owner, it’s important to understand what customer acquisition involves and why it matters. You’re certainly not alone in this quest: The Australian Retailers Association found that, as economic conditions become more challenging, retailers are increasingly focusing on the acquisition of new customers and building customer loyalty.
What is customer acquisition?
Gartner defines customer acquisition as ‘the process of identifying and developing opportunities in the sales channel and executing them to close the deal. It involves engagement with prospects and alignment with sales efforts across the buyer’s purchase journey’. In other words, it’s attracting new customers and persuading them to buy from your business.
Naturally, this is the lifeblood of any organisation, and it relies heavily on advertising, marketing and tempting your (potential) customers with unique selling propositions. This typically includes efforts such as content marketing, social media campaigns and loyalty programs. The ultimate aim is to generate new leads and convert them into paying customers.
Read more: Grow your business
Why does customer acquisition matter?
Customer acquisition has a direct impact on a company’s growth and profitability. Its effects include:
- More revenue: New customers equate to additional revenue streams and, thus, more profitability.
- Repeat business: Happy customers will more likely than not turn into repeat or even regular buyers.
- Offset acquisition costs: If you bring on board new customers, your financial investments in marketing and advertising will likely be offset.
- Recommendations: Satisfied new customers can become your biggest advocates by recommending your business to other potential customers. Such word-of-mouth marketing can be invaluable as it often leads to referrals and organic business growth.
Read more: Word-of-mouth marketing: how to turn your customers into brand advocates
The customer acquisition process
Customer acquisition is no one-size-fits-all process. Rather, it comprises a variety of strategies tailored to the specific needs and preferences of a company’s target audience. Typically, though, there are three main components to it:
1. Market research
To start with, identify the specific needs or problems that your products or services can solve. It always helps to have a good understanding of your market segment.
2. Marketing strategies
Develop some cost-effective approaches to reach the right audience for your offering. You can use tools such as social media and email campaigns to engage potential and existing customers.
3. Data analysis and evaluation
To know if you are doing the right thing, continually review how your different strategies are performing. Try to monitor KPIs such as conversion rates and keep tabs on your acquisition-related costs.
Related: Complete guide to email marketing
Customer acquisition strategy approaches
A successful business rests on effective approaches to customer acquisition. Here are some tried-and-tested strategies you may want to consider in order to increase your customer base:
Know your audience
Before you do anything else, you need to know who you’re trying to sell to. It’s always a good idea to conduct in-depth market research in your target markets to understand your target audience’s behaviours, preferences and pain points.
Online presence and content marketing
Develop a strong online presence by setting up active social media profiles and a user-friendly website that will appeal to potential customers. Naturally, your content needs to be relevant and engaging to draw in visitors and to build your brand reputation and authority.
Read more: Employer branding
Search engine optimisation
Once you’ve created your content, make sure it is optimised so it ranks highly in search engine results. This will make it easier for your potential clientele to find you.
Pay-per-click advertising
Set aside a budget to invest in search engine ads and social media advertising to target specific demographics and user interests. If you manage pay-per-click advertising effectively, you can reach potential customers with high precision, making this a very effective tool.
Email marketing
If you have an email list, run email campaigns to nurture leads and guide them through your sales funnel. Take care to personalise your emails for more effective results.
Loyalty programs
According to the 2023 McKinsey Customer Loyalty Survey, consumer-facing Australian companies can address neutral or negative customer sentiment by investing in loyalty programs. The research shows that organisations with sound loyalty programs can expect higher sales and a greater return on their investments in customer acquisition. This is because customers enrolled in these programs end up spending more, churning less and demonstrating a greater willingness to recommend their preferred brands – in this case, you! – to others.
Social media engagement
Just setting up a bunch of social media profiles isn’t enough. Take care to actively engage with your audience, for instance, by responding to public comments and private messages. This builds loyalty and trust in your brand.
Leveraging testimonials and reviews
Finally, encourage satisfied customers to leave reviews for you on relevant platforms. Moreover, showcase testimonials on your website and in your marketing materials to build further credibility.
Related: What is networking and why is it so important?
Managing customer acquisition costs
Effectively managing your customer acquisition costs is essential to ensuring the sustainability of your business. High customer acquisition costs can erode your profitability, so it’s worth taking some steps to control and optimise your spending in this domain:
- Calculate your customer acquisition costs: Determine your total outlay by dividing your total spend on customer acquisition by the number of new customers you acquired within a specific time frame.
- Perform a lifetime value analysis: Assess the long-term value of your newly acquired customers. Take into account the average revenue generated by each customer over the course of their relationship with your business.
- Fine-tune your targeting: Continuously refine the targeting parameters of your advertising campaigns. Avoid any targeting that is too broad or generic to minimise wasted ad spend.
- Optimise your conversion rate: Improve your website’s conversion rate by trying to reduce the cost per acquisition. One way to approach this is to enhance the user experience to drive more conversions.
- Carry out A/B testing: Experiment with different ad content, messaging and landing page designs to see which ones are most effective. Then, optimise your campaigns based on the data and results of such A/B testing.
- Drive customer retention: Implement loyalty programs and strategies to keep your existing customers engaged. Customer retention is a key factor in managing your acquisition costs. After all, acquiring a new customer is believed to be anywhere from five to 25 times more expensive than retaining an existing one.
- Monitor and adjust your approach: Regularly check how your acquisition channels are performing. If necessary, be ready to adjust your strategies if your methods are not delivering the desired results and ROI.
Building lasting relationships
Ultimately, customer acquisition is not merely about acquiring customers; it’s about building lasting relationships and positioning your business for long-term profitability and growth. Embrace the principles in this guide, and you’ll find that pursuing suitable customers can help you succeed in the Australian market in the long term.
Related: How to promote your business
