Definition, measurement, and examples
What is customer acquisition?
Customer acquisition refers to the process of bringing in new customers or clients for your business. This is typically achieved when a customer purchases your product for the first time, or subscribes to your service, and it is, in many ways, the central goal of a company.
While customer acquisition tactics can involve all parts of a company, from sales to customer service, in this guide we’ll focus on the role played by marketing. We’ll help you understand customer acquisition strategy and how to optimize for your business.
What is the purpose of customer acquisition?
Simply put, customers are essential for making a business successful. Where customer acquisition ranks in your priorities is based on different factors—for example, it will probably be at the top for a new and growing business that needs to attract a customer base. Meanwhile, if your business has been around for some time and you have customers who know your brand and products, attracting potential customers may be less important than supporting customer retention or loyalty.
Of course, both goals are related. All loyal customers or repeat purchasers started out as new customers. Even for companies that already have a large audience of repeat customers, it’s important to keep creating opportunities to acquire new customers to keep your business growing.
What is acquisition marketing?
Acquisition marketing refers to the tactics used by businesses to attract, engage, and convert new customers. This includes both paid advertising and organic marketing. A good acquisition marketing strategy will help you reach potential customers and then usher them through the customer acquisition funnel.
The customer acquisition funnel
The customer acquisition funnel represents the journey of a potential customer, from first learning about your company to making the decision to become a customer (and returning customer). You may be familiar with the marketing funnel. The customer acquisition funnel is very similar, though it specifically focuses on converting new customers, and therefore differs from the typical marketing funnel that includes retention and loyalty.
As with the marketing funnel, there isn’t a single universal version of the customer acquisition funnel. However, they all follow the same overall structure, starting with the largest amount of potential leads at the top, with your pool of leads getting smaller as you focus on those who are the most likely to convert, until you have narrowed the audience down to the people who become your paying customers.
Here is an example version of the customer acquisition funnel:
This is the stage where people first become aware of your brand and product or service, such as by seeing an ad or hearing via word of mouth.
Potential customers seek out more information about your business. They may show interest by visiting your website or researching your brand.
Prospects become qualified leads by taking actions that indicate they are considering your product or service, such as subscribing to your mailing list or signing up for a free trial.
In this stage, potential customers demonstrate intent to purchase. They may add products to their cart on your website.
This is the conversion stage where someone purchases your product or service and becomes your customer.
Marketing channels are the building blocks of your customer acquisition strategy. Different channels will be most effective in different stages of the funnel, based on format, placement, and type of engagement. Here are a few examples of channels you can use to help acquire new customers.
Use content marketing as a way to catch the attention of new audiences in the awareness stage. You can publish a blog on your brand’s website, offer downloadable content, host a webinar, and more. Focus on creating content that is relevant and useful for your desired audience, and use search engine optimization (SEO) to make the content discoverable. Don’t aggressively promote your products at this stage—the purpose is to introduce new audiences to your brand name and give them a positive association with you.
Your social media channels can help you reach potential new customers, particularly in the interest stage of the funnel when they are getting to know your brand. You can express your brand voice and company values in the content you post. You can partner with an influencer and have them demonstrate your product for their community of followers.
Display ads, video ads, audio ads
Paid advertising across channels such as display, video, and audio ads, as well as search engine marketing, can help potential new customers both learn about your brand and keep you top of mind as they go through the consideration stage. You can also use these ads to promote specific deals or discounts to encourage purchase intent.
Consider creating an email mailing list for people who have shown interest but not yet become customers. Sending useful content or product information can help them remember your brand and keep you in consideration for their future purchases. Email marketing is also an opportunity to inform subscribers of special sales or discounts for new customers to encourage them to convert.
How do you measure customer acquisition?
You should measure the success of your customer acquisition strategy not just by the number of new customers you gain. You also need to take into account the resources it took to acquire them. Tracking your customer acquisition cost (CAC) can help you set realistic goals and evaluate the performance of your marketing channels.
How to calculate customer acquisition cost
The basic formula for calculating CAC is dividing the total amount spent on acquisition efforts by the number of new customers you have acquired. This will tell you how much it costs your business to bring in each new customer.
For example, if you spend $2,000 on advertising and acquire 100 new customers, your CAC is 2,000 divided by 100, resulting in a CAC of $20.
The specifics of the CAC formula for your business depends on your customer acquisition strategy. Consider all the resources you use—paid advertising, events, sales, etc.—and include them in your total spend.
Minimizing customer acquisition cost
The most direct method of minimizing CAC is by reducing your spend on acquisition efforts. Monitor the performance of your marketing campaigns so you can optimize cost. For example:
- Test the creative and messaging in your ads to find which are the most effective.
- Track performance of ads by channel so you allocate your spend based on what performs the best.
- Identify which social media channels are seeing the highest engagement so you can focus your efforts there.
- Invest the effort to create quality content marketing, to improve SEO and also to provide the best experience for potential customers.
Remember that there is no universal best CAC, and whether your CAC is “good” or “bad” depends on your business. If your customers typically become loyal and make repeat purchases, then their customer lifetime value—the total amount you earn from a customer over the course of their relationship with you—may be high enough to justify a higher CAC.
How to develop a customer acquisition strategy
Before you start your marketing efforts, ensure you build a customer acquisition strategy to guide you. Below are the key steps in creating an effective strategy.
Identify your desired audience
Who is your ideal customer? Look at your existing customer base, competitors in your field, and market research to determine what they are looking for in a product or service. Create customer personas using this information so you can better understand their interests, needs, and pain points.
Define your goals
What does success look like for your business? Your end goal may be the number of customers you want to acquire or target CAC. Be sure to also define key performance indicators (KPIs) to evaluate progress along the way, such as number of leads, traffic to your content marketing, or engagement on your social media posts.
Plan your campaign for each channel
Which customer acquisition channels do you want to focus on? Once you answer this question, you can determine the tactics you will use and the KPIs you will measure. Identify the resources you need to acquire, when and how you will launch on each channel, and a timeline for determining results.
Track performance metrics and optimize
How are your campaigns performing? Regularly review metrics so you can optimize for the most successful channels and refine your brand strategy.
3 customer acquisition strategy examples
Here are a few examples of ways that businesses have used Amazon Ads to help acquire new customers.
Barilla reaches new audiences for growing business
The veteran pasta brand worked with Compass Marketing to reach new customers for their legume pasta business using Sponsored Brands and Sponsored Display.
L’Oréal grows sales in the Middle East
L’Oréal created a full-funnel multibrand strategy to drive customer acquisition in the Middle East, resulting in a 59% growth in their overall sales on Amazon.1
SpoonfulONE improves efficiency and effectiveness in customer acquisition
Baby nutrition company SpoonfulONE used the advanced measurement and analytics capabilities of Amazon Marketing Cloud to optimize their strategy for increasing audience reach and customer acquisition.
If you’re interested in marketing solutions for your customer acquisition strategy, you can learn more about Amazon Ads’ products or contact us to get started.
1 Advertiser-provided data, 2021, KSA, UAE