Optimize Cost Per Acquisition In The Startup Environment

How much are you willing to pay to attract a new customer?

The global marketing spending in 2020 surpassed $1.3 trillion, so it’s safe to say that many businesses are willing to spend a significant amount of money to acquire new customers.

Since you can’t run a successful business without customers, customer acquisition should be one of your primary concerns. However, as customer acquisition costs keep rising you will need an excellent strategy to get your money’s worth. This article will tell you how to set up such a strategy and how to minimize customer acquisition costs, specifically in the startup environment.

  • What Is Customer Acquisition?

Customer acquisition refers to everything you do to attract new customers and increase profits. That includes all of your spending on SEO, marketing, customer support, and everything in between. The final costs are calculated from all aspects of the customer journey, and you have to be very careful about your spending to stay above water.

However, attracting a new customer is just half of the work. The other half is turning that new customer into a loyal, repeat customer for your brand.  In order to retain customers, you need to build strong relationships if you want to keep your business growing. Let’s take a closer look at what customer acquisition costs include.

  • 5 Main Customer Acquisition Activities

  • 1. Employee Salaries

How much money do you spend on payroll each month and each year? When you calculate your customer acquisition costs (CAC), employee salaries play a large role.

Of course, if you run a smaller company, these costs will likely be much less significant than if you run a large company with hundreds or even thousands of employees. The  CAC for employee salaries varies from one industry to another, so it’s not a bad idea to contact a custom web design company for expert advice and accurate predictions. Along with custom web design, professional agencies can act as consultants in various aspects of your business.

  • 2. IT Costs

All businesses have IT costs, no matter how small they are. As a business owner, you have to spend money on running a website on using other IT tools depending on your business, such as software tools, mobile apps, data analytics and more. All of these tools can play into your customer acquisition costs, if you are using them to attract new customers. You probably already know that IT costs rarely come cheap, so you have to add all of them to the final equation. There are all kinds of SaaS solutions you can use to cut down on IT costs, but they typically require an investment.

  • 3. Digital Marketing Spending

It takes creative marketing and hard work to get your business ahead of the competition. The methods you use to drive visitors to your website, generate leads, and increase sales all cost money. If you want to advertise your brand using Google Ads and social media networks, you’ll have to spend a significant amount of money on clicks, leads, etc.

The good news is that the more money you spend on ads, the better ROI you’ll have, but only if your strategies are in tune with the latest trends. Experienced web developers from Houston can help you make sure that your investments pay off. You could do things alone, but that’s a risky venture, especially if your business is still in its early stages.

  • 4. Content

Content marketing is basically another form of marketing you can’t do without. But of course, it too will cost you money. Every video ad, every 3D product render, every video presentation, fresh website content, blog post, and social media post requires manpower, equipment, and know-how. Since no one will do all of that for free, you’ll have to add all content marketing costs to the CAC formula.

  • 5. Inventory Management

Lastly, if you sell anything other than digital products, you’ll have to consider inventory upkeep costs and storage management. Also, if the products in your offer have a limited shelf life, you’ll have to include waste management and transport. If you hold your products in stores across the world, you’ll also have to factor in the transportation costs, which can be extremely high.

  • How To Calculate Customer Acquisition

When you finally want to work out the final costs of your customer acquisition, you should consider every dollar you spend on the activities covered above. You’ll also have to factor in the total number of new customers you acquired in the same period. You can calculate the costs at the end of every month, quarter, year, and so on. The formula is as follows:

Total sales costs + total marketing costs / total number of new customers = customer acquisition costs

  • Optimizing Your Customer Acquisition Costs By Reducing Spending

To make your customer acquisition costs worthwhile, you’ll have to prove that you’re good at balancing all kinds of factors. That said, there are some things you can do to reduce overall spending and improve CAC costs. Here are a few useful tips that will help you save some money in the long run.

  • 1. Improve Your Targeting

Customer acquisition costs can skyrocket if you don’t get your targeting right. Sending paid ads and emails to the wrong people will damage your ROI faster than you think. That’s why you must find the ideal buyer persona to optimize your lead generation strategies.

Put yourself in your customer’s shoes and try to answer a few basic questions such as:

  1. How does your product help your customers?
  2. What are the challenges your customers face?
  3. What are your customer’s demographics?
  4. What benefits do your customers want from a product?
  5. Why is your product the best option?

Understanding details like these will help you improve your targeting. which will have a positive effect on sales and ROI. However, even if you’re spot-on with your ad campaigns, you should keep updating your buyer persona as needed, to provide your customers with more value.

Think about A/B testing your website pages to see which ones perform better. That will help you get closer to your audience and improve future targeting for better results.

  • 2. Set Clear Goals

Once you know who your customers are, you should set goals and objectives for yourself, the company, and every member of your team. Keep a close eye on customer acquisition metrics and try to optimize future actions with your goals in mind. The idea here is to come up with a strategy based on the data you analyze.

  • 3. Choose Your Advertisement Platforms Carefully

The next step is to find the best advertisement option for your products and services. You have plenty of options to choose from, and the choice you make should be based on the type of content the platform uses. For example, if you sell art and other visual products, Instagram is by far the best choice.

However, if you want to inform your customers about a product with unboxing videos and similar content, you should choose YouTube as your primary channel. Find out where your customers spend the most time, utilize those platforms and choose the type of advertisements that are the most likely to reach them.

  • 4. Motivate Customers To Provide Feedback

Try to motivate your customers to give you feedback about your brand, product, offer, and their experience. With the use of welcome emails, surveys, and post-purchase communication, you can reach out to your customers and see what they think about your company.

Once you know what your customers like and dislike, you will be able to improve customer acquisition strategies in the future. Also, be sure address and resolve all negative comments to boost trust and build stronger relationships with your customers.

  • 5. Generate Leads Using A Chatbot

Whenever a new customer comes to your website, you have to do everything possible to keep them going down the sales funnel. The ideal thing to do is to hire a few live sales agents that will help your customers get what they need. However, if you’re running on a higher budget, you can get a chatbot instead.

Chatbots are very effective when it comes to improving sales and the overall customer experience. Once you set up a knowledge base, your chatbots can help your customers get the answers they need to decide to try your product or service. Any level of support can have a positive effect on customer acquisition costs.

  • Final Words

There are many different methods you can try to minimize customer acquisition costs. However, not all of them can apply to different types of products or services. It’s up to you to find the winning formula based on your audience and your offering and get the most out of every marketing campaign.

Remember that you’re up against tens of thousands of similar companies, so don’t be afraid to get creative to win over new customers. As long as you deliver on your promises and show your customers that you really care about them, you should be able to cut down on CAC. Keep a close eye on data, keep A/B testing different features, and if you play your cards right, you won’t have to worry about high customer acquisition costs.