Definition, Formula and Creating a Strategy (2023)
Paying customers are the lifeblood of any business, no matter which industry, niche, or profession you’re in. While every business owner and manager is paying attention to customers, not everyone is looking through the lens of a solid customer acquisition strategy.
With a customer acquisition process in place, you’re better able to turn your revenue into a more predictable, repeatable process, instead of a random occurrence. You’ll also have a better idea of how it all ties into your finances, including the average earnings each customer brings versus how much it costs to acquire customers and earn their loyalty.
If you’re looking to build a customer acquisition plan, you’re in the right place. In this article, we’ll look at what it is, how to calculate it, and how you can start implementing a customer acquisition strategy today.
What is customer acquisition?
In literal terms, customer acquisition is the process of converting potential customers into paying customers. But in reality, a customer acquisition strategy has a lot more to it.
It’s a measurable, repeatable marketing process that catches a prospective customer’s attention, moves them through the buying cycle, and turns them into a long-term paying customer.
The customer acquisition process is often divided into three stages:
- Awareness. A lead discovers your brand and shows interest.
- Consideration. The lead shifts into becoming a prospective customer as they start to do research and consider making a purchase.
- Conversion. The prospective customer converts into a paying customer. From this point, the brand can shift its marketing efforts toward retention, or earning their long-term customer loyalty.
A successful customer acquisition strategy takes all of these stages into consideration, implementing tailored marketing practices and curating the user experience every step of the way.
Calculating customer acquisition cost (CAC)
Every business needs to understand how to calculate its customer acquisition cost (CAC). It’s how you get to know whether your marketing approach is profitable.
To determine your CAC, divide the total cost of marketing incurred by the number of new customers acquired.
Customer acquisition cost formula: Total marketing spend / total new customers
Let’s assume our LinkedIn page brings in 15 customers a month and you spend $200 developing content. Your CAC would be: $200 / 15 = $13.33 per customer.
Once you’ve calculated your CAC, you can use it to calculate your profit on each order.
For instance, if a customer spends $70 on average when they buy from your business and you keep a 50% margin on each order, your profit would be:
$70 (average order value) x 50% (gross margin) – $13.33 (CAC) = $21.67 (profit)
You can know our customer acquisition cost for different marketing initiatives by using tracking/reporting tools like Shopify Reports.
6 customer acquisition strategies to try
Ready to start your own customer acquisition efforts? Let’s look at a few of the top tried-and-true techniques that brands all over the world are using.
Email marketing is one of the most profitable forms of marketing out there. Data from Statista shows that brands in the retail, ecommerce, and consumer goods industry earned a whopping $45 in return on investment (ROI) for every $1 they spent on email marketing.
First, you’ll need to generate an email list. You can do this through pop-ups and newsletter signup forms on your website, as well as events like hosting contests and giveaways through your website and social media.
Once you’ve built your list, there are plenty of ways to use email to build relationships with leads, including:
- Newsletters. Keep customers in the loop about what’s happening in your business. Discuss news, new product launches, and get creative with “behind the scenes” content like how your products are made and who your team is.
- Promotions. Have a sale or event coming up? Generate interest through email.
- Transactions. Use sign-up and purchase confirmations as an opportunity to sell, upsell, and cross-sell more goods.
2. Content marketing
You know the saying “Content is king.” Especially in today’s world, where users are spending hours per day consuming content on websites, social media, and streaming services.
A solid content marketing plan is necessary if you want to grab people’s attention, engage them, and convince them to take the plunge and make a purchase.
Your content marketing plan can include:
- Blogs. Write helpful and interesting articles about your industry, products, and topics related to your products. For example, if you’re a beauty brand, you can blog about skin care tips and offer makeup tutorials.
- Social media. Create posts, videos, and interactive content related to your brand. Be sure to back it up with user engagement—for example, reply to every comment and leave comments on other posts to stand out.
- Other forms like podcasts, print publications, apps, press releases, and more.
Beauty brand Beauty Pie blogs about everything from customer spotlights to skin care, to supplements to myth-busting investigations in the beauty world.
Influencer marketing is a massive industry, especially on social media apps like Instagram, Facebook, and TikTok. With this customer acquisition channel, brands partner with influencers to promote their products or services. By definition, an influencer is an online personality or entity that has their own loyal, engaged following.
If you find the right influencers to partner with—those who are in your niche and are relevant to your brand—you can get in front of hundreds or thousands of potential customers.
You can have an influencer create content about your brand or products in exchange for payment or free goods. You can also try affiliate marketing, where influencers get a cut of your sales.
Just watch out for the pitfalls: it can be tough to track ROI, and you’ll need to put forth some investment upfront.
4. Traditional advertising
Advertising isn’t dead. You can still benefit from customer acquisition channels like print advertising, TV ads, billboards, and direct mail. These will of course depend on the type of business you have and the ROI potential for using these less-scalable, more geographically targeted techniques.
This will come with some trade-offs: for example, you won’t be able to track impressions, views, and engagement with your physical ads the way you can with digital marketing techniques.
But you can use omnichannel marketing to tie it all together. For example, a printed ad that leads customers onto your website or app, and into your digital funnel.
5. Audience building
With social media platforms like YouTube, Instagram, and Twitch, ecommerce brands have been able to build huge online followings of potential customers.A real-world example is Gymshark.
Gymshark has more than six million followers on Instagram and cultivated a community of brand ambassadors who endorse the brand everywhere.
This not only lends its brand authority, but it also creates a base of customers Gymshark can reach whenever it wants to increase sales or promote a new item.
Although most audience-building strategies require time, effort, and consistency, they are often considered worthwhile since they can help you create a customer group you can reach at any time for free.
6. Paid advertising
Paid advertising has emerged as a popular way for ecommerce brands to attract new customers.
Paid ads offer several benefits that can help businesses grow quickly, such as driving exposure to your brand and offering targeting abilities that let you tailor offerings to people’s interests and behaviors. So it isn’t a surprise that many ecommerce companies are using them as part of their customer acquisition efforts.
For instance, makeup brand Glossier uses Facebook ads to find new customers online.
While Facebook and Google reign as the most prominent platforms for paid ads, there are other options to consider. The choice of which site to use depends on understanding the audience and where they spend their time online.
Build the process, reap the benefits
When you approach it thoughtfully and methodically, a customer acquisition strategy can have major benefits for your business. You’ll be better able to systematically bring customers in the door and keep them coming back for more. You’ll also have a better understanding of the financial components, like your customer acquisition cost and how it ties into your profits.
All that’s left to do is start building your plan, implementing the steps, and measuring your outcomes—then keep repeating the process, improving a little more with each cycle.
Customer acquisition FAQ
What is a customer acquisition strategy?
A customer acquisition strategy is a plan to attract and convert potential customers. It involves using various tactics tailored to your target audience’s preferences to guide them through the buying process. The goal is to capture their attention and turn them into loyal clients.
How is customer acquisition different from customer retention?
Customer acquisition focuses on identifying and converting new customers, whereas customer retention is the process of satisfying and nurturing existing clients to ensure repeat business. Both are crucial for business growth and sustainability, but they require different strategies and tactics to achieve success.
What are the best customer acquisition tools?
- Shopify Email: This is an email marketing app built for ecommerce stores. You can use it to create elegant, branded emails to send to your subscribers.
- Shopify Inbox: A free Shopify app, Shopify Inbox lets you turn visitors into customers via real-time chat. You can send discounts and recommendations from your Shopify store inside chats with just a few clicks, turning browsing sessions into shopping sprees.
- Referral Candy: This is a tool for building referral products for your business. You can use it to create fun, engaging loyalty programs that help you reach new customers via word of mouth.