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One of the key costs that businesses try to cut is the Customer Acquisition Cost. If they can keep this metric low, they’ll have a greater profit margin, all other factors held constant. But what exactly is Customer Acquisition Cost?
Customer Acquisition Cost Explained
Customer Acquisition Cost (CAC) is the value of the resources expended in the process of gaining a new customer within a specific period. In precise terms, it’s the total value of resources spent on sales and marketing efforts, divided by the number of customers gained through those efforts. Here’s the formula for calculating it:Total Cost of Marketing and Sales
Customer Acquisition Cost (CAC) ꓿ —————————————————
Number of New Customers Acquired
If your business spends a total of ₦200,000 on sales and marketing in one month, and gains 10 new customers from that effort within the same month, your CAC would be:₦200,000
CAC ꓿ —————-
10
∴ CAC꓿ ₦20,000 per new customer
So, it cost your business ₦20,000 to get a single customer, within the particular period in question.What Is a Decent Customer Acquisition Cost?
There’s no ‘right’ CAC for all business. While there may be an industrial average that you’ll want dip beneath, you should also think about what your business could possibly achieve if it was functioning at a near-perfect level of efficiency. This would mean getting rid of all waste or unnecessary expenses in the process of winning new customers over to your business. Think about what your spending on sales and marketing would look like if this were achieved, and use the figure you come up with like the one you’ll strive for.Ways To Reduce Customer Acquisition Costs
These are some of the ways you could cut your CAC.Target the Right Audience
A lot of the time, marketing and sales campaigns fail to deliver quality leads because they’re targeted at the wrong demographic. Money goes down the drain, and the leads aren’t interested in becoming paying customers. But let’s say you have a clear description of people in your target audience—the buyer persona. If you direct all your marketing towards them, you’re far more likely to gain quality leads and, ultimately, customers from that group.Find our comprehensive listings of businesses in Nigeria here https://businesses.connectnigeria.com/
It will cost you far less to win each new customer than it would if you just shot the marketing and ads at an undefined population.
Communicate Through Content that Converts
Are your marketing and sales pitches good enough to drive significant conversions? This question should be top of mind for you. Think about the material that will be created for your marketing campaigns. Does the messaging resonate with the specific audience you’re speaking to? Does it lead them down a funnel to conversion? Are the Calls-to-Action (CTAs) strong enough to inspire the response you desire from prospects? If you don’t have the skills required to create the right kind of content in-house, you can outsource the process to an agency. But don’t leave all the work to them. Examine what’s being done, and ensure that it conforms to your brand image, and speaks to the needs of the people you’re targeting.Retain As Many Customers As You Can
The most obvious path to achieving this is to consistently provide great products and quality customer service. Run with these two, and keep in touch with your clients. This way, you’ll retain a large portion of them. If they’re satisfied with what you’re giving them, they’ll spread the word about you to other people, who could eventually become your customers also. Word of mouth could bring in more clients for you, even if you’re not spending a dime on acquiring them.Automate Your Marketing Efforts
You can cut a lot of marketing costs if you utilize automation tools at various points. One example is marketing emails. You can set them to deliver at specific times, and use an auto-response system where appropriate. Landing pages are another useful tool. They’re especially effective if the content is great, and there’s a strong Call to Action (CTA) that’s capable of upping conversion numbers. Chatbots come to mind as well; they could cover some of the turfs that an actual human marketer would. These technologies cut some of the costs typically incurred when human agents are doing the work. You will still need a good deal of human intervention, but automated content delivery and chatbots are capable of keeping your marketing budget lean.Incentivize Testimonials
We have already referred to existing customers’ word-of-mouth as a great way to bring in new customers. But what if they aren’t given to talking about your offerings (as is the case sometimes)? Incentives could do the trick here. Come up with an inexpensive promo, which rewards participants if they contribute testimonials about your product. In return, you could hand them (the existing customer) a few products for free, or sell them to them at a fraction of the actual price. You may publish the testimonials on your website and social media pages. Also, encourage your customers to spread the word about your business to their friends and families. This may wind up costing a fraction of the cost you’d usually incur.Final Words
Many businesses struggle to keep their customer acquisitions low. But it can be done. With some planning and targeted marketing, your company can make this happen. Featured Image Source: Neil PatelGot a suggestion? Contact us: editor@connectnigeria.com
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