And Where Successful Businesses Focus Their Efforts
How much time and money does your business spend each month acquiring new customers? Do you know the cost? If not, it’s worth looking into. Of course, any business is going to spend money and time bringing in new customers. You need to spend money to get the word out about your business, and that likely includes web ads, other types of paid advertising, marketing materials, and sales and customer service staff.
Knowing your customer acquisition costs is important, because it allows you to take a hard look at the cost of bringing in a new customer, and whether the money you are putting out is well spent. For example, are your ads converting? Are your marketing dollars well spent? It could be that you are spending far more money than necessary to gain new customers, and with a few tweaks, that budget could go way down while simultaneously bringing in more customers than ever before.
How To Calculate Customer Acquisition Costs
The first step is calculating customer acquisition costs. The formula is fairly simple. Add up your total sales and marketing costs during a set period (for example, one quarter). This total should include all costs associated with marketing, advertising, sales and related expenses. Next, divide that total by the number of new customers brought on during that period. This should give you a reasonably accurate customer acquisition cost (CAC).
How Do You Lower Customer Acquisition Costs?
There are many ways to lower CAC, including reducing ad spend or other marketing costs, reducing staff, or trimming other costs that don’t contribute to the addition of new customers, or the retention of existing customers.
Meticulous tracking is the way to go when it comes to lowering that CAC. This helps you do things like optimize your ads, eliminate marketing efforts that aren’t converting, and increase and improve actions that work. Don’t throw money away by continuing to spend on ads, flyers, events, or other strategies that don’t pull their weight.
Most important, though, is customer retention.
Focusing On Customer Retention
A company that focuses more on bringing in new customers than retaining current customers will have higher customer acquisition costs. Customer retention should always be a priority. If you are throwing resources at leads who might become customers while neglecting proven customers that already love your products, you are also missing out on one of the best methods of customer acquisition—word of mouth.
When your customers are happy, they are more likely to recommend you to family, friends, coworkers, and their own customers. So, focusing on existing customers can lead you to acquire new ones. Happy customers not only refer family and friends but also leave reviews. They can be counted on to offer feedback on new offerings and are an incredible resource that will help you refine your offerings and your marketing tactics.
How Do You Retain Your Customers?
Customer service is an easy answer. Customer retention depends on good customer service, but what does that mean? How do you serve your customers in a way that delights them and keeps them coming back?
Understanding Your Customer’s Needs
To serve your customers, you need to know who they are and what they need. You must understand your customer’s pain points, what motivates them, what problems they have that need to be solved, and what keeps them interested and loyal to a business.
The easiest way to find this information is to ask. Ask your current customers what they would like to see as far as product and service offerings. Find out how satisfied they are with your products, services, and overall customer experience. Dissect reviews and feedback to see where your service can be strengthened. Are there problems you can solve for your customer or questions you can answer?
Keeping Them Interested In Your Brand
Don’t let your customers forget about you. Find ways to keep them interested and foster loyalty. A comprehensive onboarding process that fosters connection is essential to keeping new customers engaged. Give your customers a good reason to follow you on social media. Be sure to send out regular newsletters that customers want to read by making them informative, useful, and entertaining.
Building Customer Loyalty
How do you build loyalty? This naturally happens when you exceed expectations, but what are some other ways? You can offer loyalty and incentive programs, reward them for referrals, and find ways to surprise and delight them.
Don’t Stop Selling To Them
It can cost up to five times more to acquire a new customer than it costs to keep an existing customer. But you have to keep selling to them. That’s how they become customers that purchase again and again. Tiered loyalty programs are good incentives, and it’s important to recognize your loyal customers.
Small Touches Make A Big Difference
Sending thank-you notes, birthday greetings, or other personal notes is the type of customer-focused touch that increases loyalty and keeps you in the mind of the customer.
Good customer service is nice, but it might not be enough to turn a customer from a one-and-done to a raving fan who sings your praises and keeps doing business with you. Let’s take a look at two scenarios and decide how much extra time and money it might take to tweak the customer experience for a better outcome.
Customer A is looking for a service that will help him run his business smoothly. He searches and finds a business that offers a variety of products and services that match his needs. He makes a purchase and everything goes as expected. He is satisfied with the product and finds the service to be courteous and efficient. Overall, he is pleased with his customer experience. He provides his email address to receive product news and other information, but the company doesn’t send regular newsletters and when they do, they are lackluster. Customer A follows this company on social media, but they don’t post very often.
Customer A doesn’t think about the business too much, despite the fact that he was happy with the product and service. When he is in need of a similar product or service, he doesn’t feel a huge pull to go back to that company. This isn’t because he was unsatisfied with his experience, but because he just doesn’t feel loyal or attached to the company.
Customer B is also looking for a service to help her run her own business more smoothly. She discusses her needs with a fellow business owner in the same field and they tell her she just has to try this incredible service she uses. Customer B is impressed with the glowing review and decides to give it a try.
She follows the business on social media and finds them to be active, posting regularly and offering interesting content that is useful to her and is also entertaining. She signs up for their newsletter and receives an email series that is tailored to her business and addresses her pain points and answers many of the questions she has about their products and services. She decides to buy and is thrilled with the service she is provided.
Several days after she makes her purchase, she receives a follow up from the company, asking her how she is doing with the new product and offering some useful tips and tricks on how to get the most out of it, as well as a detailed FAQ. The follow-up also asks for feedback on the product and her customer experience and ends with a heartfelt thank-you note.
Customer B is very happy with the service, and the company sends out a regular email newsletter with product news, surveys, specials, and industry information. In one of the newsletters she learns about the release of a new product that would be a perfect fit for her, so she orders it. She also recommends this product to a colleague, since it would be perfect for them, too.
As you can see, there are ways to improve customer retention, increase referrals, and keep customers interested in your offerings. Social media and email marketing are two powerful ways, but there are also opportunities in the little things, like follow-up notes and emails, requesting feedback, thanking customers for their purchase, proactively offering to answer questions or solve problems, and engaging.
How Inbound Marketing Reduces Your Cost of Customer Acquisition
Whether you are targeting prospective customers or retaining existing customers, inbound marketing strategies can help you reduce costs. While inbound does not replace outbound tactics such as web ads, physical marketing materials, in-person sales, or cold calling, it can help reduce overall costs while increasing brand visibility and customer retention.
Content creation is a big part of inbound marketing, and especially now, fantastic content that educates, informs, engages, and builds trust is essential to your marketing efforts. The following are tips for improving your content and brand visibility.
Informative blog posts are ideal for keeping in touch with your audience of customers and prospective customers. You can add a blog to your website, share your posts on social media and feature them in your newsletters. You can turn blog posts into YouTube videos and link to them in your Instagram stories.
Google favors longer blog posts this year, so posts should ideally be at least 1,000 words for general blog posts. Other types of content, such as pillar posts, should be closer to 3,000 words. This is a suggestion, of course. In reality, algorithms are ever-changing and ultimately, blog posts should be concise, well-written, authoritative, and packed with relevant information your readers can use. This should be the case whether you are writing a 500-word or 2,500-word post.
Social Media Posts
Posting on social media regularly helps improve visibility and keeps you in the customer’s mind. Short, catchy, informative posts do well. Always include some kind of call to action and use images and videos in your posts. Link to blog posts and other related content. Show your human side because your customers want to do business with people. Share your story and let your readers get to know the people behind the product or service. Post often, and be sure to answer any questions that your readers have. Encourage people to share your posts and keep things fun!
Regular newsletters help customer retention, but only if you put in the effort to keep newsletters informative. Always deliver value. Write about the latest product offerings, sales, and specials. Create free content in the form of downloadable ebooks or helpful content. Include quality photographs and video content and give opportunities for feedback. Post surveys and polls, and ask readers for suggestions on new products and services.
How Will You Handle Customer Acquisition Costs?
Remember, the first step is to understand how much it is costing your company to acquire new customers. Knowing your CAC is vital and helps you make informed decisions when it comes to ad spending, hiring, production of marketing materials, and other costs related to CAC. Take a deep dive into your metrics so you can determine if there are places where you are hemorrhaging money. This could be due to ineffective ads, programs that aren’t working, promotional materials that just aren’t delivering the ROI you need, and more. The next step is to evaluate your customer retention strategy. Are you working harder to attract new customers than you are to retain them? What are some strategies you can implement to remedy this? For example, does your customer service team need additional training?
Another strategy is to evaluate your inbound marketing strategy by taking a closer look at your blog, social media, and newsletter content and exploring ways to improve it. Focusing on the customer experience and creating loyal, returning customers is key to reducing your customer acquisition costs. Millennial Services understands this and offers comprehensive tools and services to help your business thrive. Contact Millennial Services today to learn more.