Customer Acquisition Cost, also known as CAC refers to the Marketing and Sales costs that a company usually incurs while acquiring a new customer. While all companies want to reduce it, there is no way you can do away with it. As long as you want your business to thrive, you have to keep acquiring customers. It might be an expensive process, but it’s worth the money. But that should not necessarily mean it has to stay expensive!
How to Measure Customer Acquisition Cost (CAC)
You can calculate Customer Acquisition Cost by adding up all the costs spent on acquiring customers and dividing it by the number of customers acquired during that period. For example if a company spends $100 on acquiring 20 customers, then their Customer Acquisition Cost is $5 per customer.
How to Reduce Customer Acquisition Cost (CAC)
There are always areas where you can cut costs to reduce your customer acquisition cost. You will have to look for it. The more you save, the more you can invest and save for future campaigns. In order to help you out, here are ways to reduce your Customer Acquisition Cost significantly.
#1: Marketing Channels
Different marketing channels demand different running costs. The cost of running a campaign on Facebook is different than one that you would run on Twitter. Before taking a decision, analyze your situation first. Are you not getting the results that you want from a certain channel? Reduce your investments or optimize your campaigns better.
Try to understand the marketing channel and how it behaves. Pay attention to how it works. For example, some channels will assist conversions, while some won’t.
Also Read: Is Omnichannel Marketing Overhyped?
#2: Buyer Persona
At any given point in time, you are wasting part of your Marketing and Sales budget, trying to acquire leads that won’t buy. At the end of the day, this is a waste of money that you can avoid. In order to avoid this, identify who will buy and who won’t. Create an ideal buyer persona. This will help you understand who your target audience is.
Your strategy will get better, as you develop your buyer persona more and more.
Re-engaging leads through drip campaign is a great way of reconnecting with active and inactive audience. It is cheaper than attracting new visitors as well. In most cases, these leads go cold all of a sudden and they give no reason whatsoever. To attract them, try to analyze why they went cold in the first place.
For example, the last browsing activities of some leads that go cold will reveal that they were checking out pricing pages. That means they were hesitant to buy. Offer them some kind of incentive in order to convert them. Make sure that the customer acquisition cost of the cold lead does not include that of a new lead.
#4: Optimize your Website
Websites can run into glitches that cost people a lot of money in terms of business. Optimize your website, so that you can convert as many people as possible. A great way to reduce your Customer Acquisition Cost is by improving your FAQ section.
A lot of visitors have queries and some are not mentioned in your FAQ. So, incorporate these questions and answer them in a simple, yet detailed manner so that everyone can understand.
Your visitor will not have to contact you, as you have already answered their question. That means a shorter sales cycle and lower customer acquisition cost. Opt for chatbots which helps your visitors find relevant information in real time.
Longer the sales cycle, more will be the customer acquisition cost. So, you can take the matter into your own hands and reduce the time a lead takes to convert.
Communicate with your leads and always keep a channel open for them to answer their queries. Keep your free demos and trials short, but sweet. Concentrate on your best leads and do not let them fall out of your grasp.
It is every marketer’s dream to have a product that can sell itself. The onboarding process is crucial because that is what sets apart a lead from a customer. To reduce Customer Acquisition Cost during on-boarding, try to create a self-service model that will automatically help leads make the switch. See, if there are any hiccups or issues that leads face while on-boarding. Address these issues, and you will see your costs going down.
#7: Refer and Save
Many organizations have a referral program for their users. It helps save a lot of money in the long run. You acquire one customer who refers your product to three friends. These friends start using your product. Now, you have acquired four customers at the cost of one. But in order for your customer to refer your product, you need to provide top-notch service. Otherwise, why will they refer you in the first place?
#8: Customer Success
As a marketer, nothing is greater than customer success. If your customers achieve great results with your products, new customers will soon start lining up by your door. Your customers will become your advertisement. Once you are here, your customer acquisition cost will automatically start falling.
Focus on creating a great product along with a fantastic after-sales service. Optimize every single Marketing and Sales process, and you will soon see that everything is falling into place.
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