From new start-ups to well-established companies, the process of reducing customer acquisition cost, and thereby improving user acquisition, is a constant and ongoing mission. It’s one that all successful companies should remain committed to throughout their life cycle.
In addition to simply making your company more cost effective as an enterprise, reducing your customer acquisitions costs captures the following benefits:
Reinforces a culture of constant improvement, measurement and refinement within your organization
Eliminates waste in your marketing budget, providing additional allocation in user acquisition areas with the best potential to stimulate market share and revenue growth
Reduce customer acquisition costs which maximizes the competitive potential of your business. This ensures your ability to compete with both well established competitors with established economies of scale and new arrivals attempting to carve out a niche by differentiating themselves as the ‘low cost’ alternative.
There are many tactics and methods that will help to reduce customer acquisition costs and improve your user acquisition results.
Here are 4 specific tips that could do wonders for you:
1. Develop Buyer Profiles to Identify and Target Your Ideal Customers
We’ve all felt the frustration of wasting valuable time and energy on enquiries that you can tell almost immediately are from not well qualified prospects who are highly unlikely to purchase your products and/or services.
Properly targeting customers to attract and retain those ‘ideal’ customers that are most inclined to purchase and stay engaged as loyal clients, is an obvious goal for any company. What is not always obvious is the most effective tactic to best achieve effective customer targeting, which helps you to reduce customer acquisition costs.
The solution is buyer profiles.
Buyer profiles, sometimes referred to as ‘personas’ are the result of an exercise in which you visualize and describe in detail one or more of your ‘ideal customer’ types to fully articulate the target segments towards which the majority of your marketing budget should be allocated.
Typically, your ‘ideal customer’ will possess the following attributes:
Has an immediate need or predisposition for your product and/or service (i.e. motivation)
Possesses the wherewithal to purchase your product and/or service (i.e. opportunity)
Holds a key position in the procurement process (i.e. influence)
Is likely to become ‘brand loyal’ to your offering (i.e. offers potential for repeat business)
Once you’ve considered the above behavioral attributes and can begin to visualize this customer or group of customers in your mind, you are ready to begin the process of developing a useful buyer profile.
To do so, simply develop a questionnaire and then consider the following questions that will help to quantify and describe the various customer attributes specific to your industry / market that correlate best with the behavioral attributes described above.
A. Motivation
Every product and service in this world satisfies a need. What is the ‘need’ that your product satisfies and how do this need present itself to your customers? For instance, a company providing cloud data storage solutions will ideally target companies that are experiencing ‘pains’ with their current data storage solutions. These ‘pains’ may be occurring with older, more mature organizations struggling to integrate older legacy systems or they could be specific to a forward thinking company that is looking to transition a stable storage solution into a cloud solution to better leverage the access advantage of the web.
Consider scenarios like this to best articulate those industries, companies and decision makers likely to be the most highly motivated to seek and purchase the solutions you provide. Most importantly, be sure to define those segments within the larger market most inclined to respond favorably to the competitive advantages that you bring to the market.
B. Opportunity
Obviously, it is not enough for a prospective customer to simply want or ‘need’ your products and/or services. It is crucial that they also have the wherewithal to purchase, and most importantly, that your solution to their need is presented in a manner that dovetails with their envisioned purchase process.
Do you offer a product or service that entails a long, consultative sales process or even a detailed RFP or RFQ? Is so, when identifying your ideal buyer profile, you may wish to consider key opportunity factors like budget approvals, legacy infrastructure, platform compatibility, etc. Alternatively, if your product is best described as a discretionary spend, it is imperative that your buyer profile defines key factors for user acquisition like preferred product placement, price and positioning that most impact the purchase decision for these customer types.
Often, one of the most effective ways to develop a buyer profile is to define the various questions that customers will ask before they make a final purchase decision. By ‘reverse engineering’ these questions back to the original motivations that prompt them, you can easily articulate those opportunity factors that most impact your biggest and most loyal customers.
C. Influence
Can your product or service be purchased by anyone within another company? Or more likely, does it require a response from a key person tasked with procurement responsibilities within their organization? Considering ‘influence’ factors to flesh out your buyer profiles requires an examination of the typical purchase process that your loyal customers prefers, and tailoring your offering to suit those preferences accordingly.
Do your customers purchase off your website without need for consultation? Do they require custom quotations and some hand holding to better understand the advantages of your offering? Once you’ve detailed every step of the overall customer journey within the average user acquisition journey, you can best articulate when and where the final purchase decision is most often made, and as a result, you can articulate the specific title and attributes of those ideal customers who hold the most influence in the purchase process.
D. Offers potential for repeat business
A critical aspect of reducing your cost of customer acquistion (or user acquisition), is moving beyond broad sales targets and instead refining your buyer profiles to best target those ‘ideal customer’ types that offer the greatest potential for brand loyalty, repeat business, and new customer referrals. Doing so requires thorough analytic examination of your existing customer base.
Who are your biggest and most frequent customers? Which ones have been most instrumental in helping to grow your business through positive word-of-mouth by referring you to other customers?
Once you’ve developed this short list of your most valued customers, perform an unbiased examination of them to see what qualities they have in common. Are they typically large multinationals or local businesses? Do they typically belong to a specific industry or even better, a specific niche within that industry? Do they work with products and services complimentary to your own? Have they expressed a favorable attitude to a particular product or service advantage that you offer the marketplace?
Returning to the theme of products and services meeting customer ‘needs,’ you’ll often find when fully considering your best customers, that for a number of reasons, your offering met their ‘need’ in a way in which the competition simply could not. Teasing out this information not only helps to confirm your ideal ‘buyer profile,’ it should confirm for you what your core product strengths and competitive advantages are.
2. Identify and Reward Brand Ambassadors
Effective ‘word of mouth’ referral continues to reign supreme as the most cost effective method of new customer acquisition, possibly even more-so now in this age of real-time social media engagement with our customers.
The reasons are simple. People are most likely to buy products and services from companies they like, respect and trust. So, when a friend, family member or respected colleague endorses a particular product or company, the emotional qualities and behavioral factors that lead us to make a purchase are triggered to respond more favorably because that company (or product) now carries a ‘stamp of approval’ from someone we know, like and respect.
For this reason, it is critical that you identify your most loyal repeat customers and provide incentives for them to refer other qualified prospects to you. If they truly like and appreciate your products & services, not only will they be happy to do it, they’ll also be appreciative of the additional benefits that your referral program offers them. Talk about a win/win!
Referral program incentives will vary widely between industries and product types, so you’ll need to do some competitive analysis to determine those incentives most appropriate to your particular business model.
The key is to make it easy and natural for your customers. If the referral program is tailored to offer obvious and convenient advantages, your existing customers will be sure to take advantage of them. Most importantly, if they can refer you a valuable customer in a simple, seamless fashion and can then receive their referral benefit without jumping through a bunch of hoops, then you know that you have the makings of a solid referral program.
3. Reduce customer churn
Losing customers increases your customer acquisition costs in numerous ways.
Not only can it be more expensive to acquire new customers than retain existing ones, dissatisfied customers (particularly in our 24/7 social media connected world) can do serious damage to the brand reputation of your company, making new customer less inclined to trust your product and services. This in turn can increase the marketing expenditures required to convert customers as you overcome negative brand biases.
Of equal concern, losing existing customers, compromises your ability to mature and broaden customer relationships, thus losing out on crucial up-sell and cross-marketing opportunities, not to mention those vital referral relationships that you worked so hard to establish.
Within your marketing plan and budget expenditures, ensure that adequate monies are allocated towards customer support tools, satisfaction surveys, and social media platforms to facilitate an ongoing and beneficial dialogue.
Happy customers are the key ingredient in the recipe for company success and go a long way to reduce customer acquisition costs!
4. Utilize Social Login to Encourage Referrals AND Reduce Customer Churn
Having discussed the importance of retaining satisfied customers as a method to reduce customer acquisition costs, and the role social media now plays in this process, it’s appropriate to consider the benefits of Social Media login tools.
It’s a sad reality that even the best companies can lose their online customers if those loyal customers forgot or misplaced their login credentials. Imagine losing a valuable customer through no fault of your own, but simply because current technology platforms continue to facilitate account authentication procedures that are too often both confusing and time consuming!
Social Login eliminates this issue by integrating your customer’s preferred social media login credentials directly into your website’s login process. With Social Media login, not only do you reduce expensive customer churn (in turn, reducing user acquisition costs), you actually encourage easy customer referrals through the social media mechanisms that the greater world has come to know and love.
Conclusion
As you can see, the methods to reduce customer acquisition costs available to you are quite simple to implement and extremely effective when done consistently.
Given the value of these tactics, stay tuned; there just may be a follow up article here in the future with even more tips and tricks to reduce your marketing spend.
We’re always interested in hearing from our readers. What are some tactics for reducing acquisition costs you’ve experienced success with? Let us know in the comments!