The Top 4 Ways to Reduce Your Customer Acquisition Cost (CAC)

June 1, 2017 Demi Oba

We often hear the saying “it takes money to make money”, and nowhere is that more true than in customer acquisition. Customer acquisition is and always has always been a game of give and take. Brands have to give shoppers a reason to complete a purchase before they will take the steps to become a customer.

The thing is, not every business plays the customer acquisition game in the same way. Savvy brands have learned how to reduce their customer acquisition cost and are playing the game to win. Lucky for you, we’ve got everything you need to step up your acquisition game right here.

reduce CAC steps 1 and 2

In this post, I’ll be explaining the four best ways to decrease your customer acquisition cost (CAC) while actually improving your customer relationships. If you’re not sure how to calculate your CAC, we’ve got you covered there too. We’ve written a complete guide to calculating your customer acquisition cost that covers everything from figuring out your lifetime CAC to how to handle referrals and sales commissions.

Now that we’re all on the same page, let’s jump into how you can drop your CAC. 

 

1. Focus Your Acquisition Efforts

The number one way to reduce your acquisition costs is to keep a razor sharp focus on your target market. While that sounds pretty simple, it’s actually much easier said than done.

Today’s brands have an incredible number of marketing channels at their disposal, and it’s not always easy to figure out the best way to use them. Overwhelmed by all of their options, many marketing managers will try every method available instead of carefully crafting a marketing strategy that appeals to their target market. This approach can wreak havoc on a brand’s CAC, leading to acquisition overspend and very little to show for their return on investment.

reduce CAC target audience

Getting your brand’s message out there takes time, money, and effort. If you’re not getting in front of the right people, those resources are being wasted. To avoid this common mistake, you need to make sure you match your marketing channels to your target market. Narrow your focus to the people who actually want to know about and use your product, and then make sure that your message meets them where they are.

This way of thinking will help your brand build a voice and cut out the noise from your competition. By focusing on your target customers, you won’t waste valuable resources talking “at” individuals who don’t resonate with your value proposition, allowing you to focus on talking to the customers that build your business.

reduce CAC focus acquisition

Let’s say, for example, that your target customer prefers to speak in hashtags. In this instance, social media marketing might be most effective.  However, if your customer turns to Google for most of their answers, you might want to consider an Adwords campaign. This mindset will help you sort and prioritize all of the channels available to you until you’ve crafted a marketing strategy that makes a valuable impact with every dollar spent.

I know it’s often said that all press is good press, but when it comes to customer acquisition  only smart press is good press. Cut your acquisition costs by making sure you only pay for the customers you want.

 

2. Acquire Customers Once and For All

Once you’ve acquired a customer, it’s easy to feel like they’re locked-in for life.  Unfortunately, customer churn is an all too common reality for many ecommerce brands, causing many of them to dedicate more of their acquisition budget to getting those same customers back.   In other words: the fastest way to double your customer acquisition spend is by paying to acquire the same customer twice.

Getting customers to give your brand a chance can be hard, but getting them to give you a second chance is even harder.  This makes repeat acquisitions extremely wasteful and costly.

So how can brands lower their re-acquisition costs? Simple: by eliminating them. You don’t have to re-acquire a customer that you don’t lose. By investing in retention marketing, you can cure customer churn instead of simply treating the symptoms. Brands that create a strong retention strategy enjoy the benefits of better customer relationships and lower customer acquisition costs.

If you’re looking for a powerful retention tool, there’s no better place to start than a rewards program.  These programs are specifically designed to build customer relationships that keep shoppers coming back to your store. Whether it’s with points, referrals, or a VIP program, brands that choose to give something back to their customers are always the better for it. Trust me-  your acquisition budget will thank you.

 

3. Turn Your Customers Into an Acquisition Army

As we discussed earlier, it’s no secret that the most successful marketers are the ones that truly understand their customers. These strategists understand customer pain points and deliver the products and services that solve them. No one could possibly understand these shoppers more -  except for maybe the shoppers themselves.

reduce CAC value proposition

It’s true: the best marketers of your product might actually be the users themselves. They understand your target market because they are your target market, and they’re usually well connected to other potential customers.

The best part is that by allowing your customers to join your marketing campaigns, you can dramatically lower your customer acquisition costs by making the most of word of mouth marketing- a form of marketing which more than 92% of customers trust.

reduce CAC word of mouth marketing

If you’re delivering a great customer experience, chances are that your customers already want to spread the word about your brand. All they need is a little nudge to join your acquisition army, and a rewards program can give them exactly that. 

Rewards programs are built to incentivize and reward customers for valuable actions like repeat purchases, but they don’t stop there. When Uber needed a quick way to acquire riders that wouldn’t break the bank, they turned to their customers and created a referral program that propelled them to unprecedented growth.

reduce CAC rewarded actions

A referral program like Uber’s isn’t the only option, though.  You can also provide your customers with rewards for social sharing so that they can share your brand’s value with everyone in their circles. These low cost, customer driven marketing campaigns simultaneously reduce your acquisition costs while also increasing your engagement. Talk about a win-win.

 

4. Analyze Your Acquisition Strategy

The fourth and final way to decrease your customer acquisition cost works hand in hand with the first strategy we discussed. Focusing your acquisition efforts where your target customers are is an important part of effective acquisition, but if you don’t come back and analyze the results how will you know that your focus was correct?

reduce CAC drucker quote

Analyzing your acquisition campaigns will help you highlight what’s working and what isn’t. That being said, it’s important to remember that analysis is an iterative process. This means that you’ll have to return to it frequently. Just because something worked well before doesn’t mean it’ll always work in the future.

You’re probably wondering exactly what you should be analyzing. For the best results you’ll want to revisit your strategy by calculating the CAC for different campaigns and channels and assess their performance by comparing them to historical values and industry averages. If a channel’s CAC is increasing disproportionately, your customers may not value it as much as they used to.

 

Your Acquisition Doesn't Have to Be a Loss

Customer acquisition is an important part of any business model and should be treated as such. The problem arises when brands let their customer acquisition costs go unmanaged and end up spending much more than they need to acquiring the wrong customers.  While it definitely takes money to make money, don’t let that be your excuse for wasting money.

By effectively focusing your acquisition efforts, you’ll know that every dollar spent on acquisition helps introduce new customers to your brand. By investing in retention, you’ll make sure you don’t have to acquire them again.

reduce CAC summary

These engaged customers can even join in on your campaigns through social media, referrals and word of mouth marketing to help you boost your reach. Most importantly, keep an eye on your acquisition analytics to make sure that strategy works as well tomorrow as it does today.  If you do that, you can rest assured that while your acquisition costs are dropping, your customer engagement levels be nice and high.

Lower your acquisition costs with a rewards program. 
Still not sure if you need a rewards program? Complete our simple checklist to find out. 

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