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Customer Acquisition: The Definitive Guide

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Customer Acquisition: Definitive Guide

Learning the fundamentals of customer acquisition is essential for any marketer or business owner. Customer acquisition is simply the process of gaining attention, earning trust and closing sales.

What is the meaning of Customer Acquisition?

The basic definition of customer acquisition is to persuade a potential buyer to become a customer. Customer acquisition strategies are used by businesses and entrepreneurs to funnel potential customers into a buying decision.

The Customer Acquisition Process

The average startup is lazy and they don’t take the proper time to understand their market. If you’ve decided to jump right into selling before you’ve sold yourself, you’re in big trouble. Find out who your customer is, where they hang out (online and offline) and what will attract them to your offer.

Understand Your Target Market

Before you start generating leads you need to answer these questions:

  • Who are your potential buyers?
  • Why are these potential buyers going to pay for your product or service?
  • What will motivate your potential customers?
  • Where do these potential buyers visit online and offline?

Create your Buyer Personas

After you’ve analyzed your target market you should be able to answer the following questions regarding the individuals you believe will buy your products or services.

  1. What is their job title?
  2. What’s their age range?
  3. What do they want?
  4. What are their problems?
  5. What incentive (bait) attracts them?
  6. Where can you find them?
  7. What makes them listen?
  8. What solution can you offer them?

My Systematic Customer Acquisition Strategy

A while back I developed a simple and highly effective formula for acquiring new customers. Over the past few years, online marketing has changed drastically but this formula for acquiring customers has worked for over a decade and will continue to work.

It’s really quite simple, in real life you wouldn’t walk up to a stranger and ask for money. If you did, that stranger would probably ignore you. It takes time to gain someone’s trust but first you need to get their attention and educate them on why they should give you money, that’s why you tell your story.

Drew Parker’s Systematic Customer Acquisition Strategy

This is my four-step systematic approach for acquiring customers. It’s all about properly nurturing leads into making an informed buying decision. Feel free to share this strategy with your audience, I simply ask that you credit with a link back to this page.

Attention: Get the attention of your potential customers through marketing.

Education: Teach the leads you’ve acquired about your products or services.

Trust: Earn the trust of your leads with proof, trials or free products.

Commitment: Close the deal with committed customers only.

Why is this method of customer acquisition more effective?

  1. You are taking the proper steps to qualify leads.
  2. Qualified leads tend to be ten times happier with their purchases.
  3. Qualified leads are more likely to become long-term customers.
  4. This method reduces the number of refund requests.

How long does it take to acquire a customer with this systematic approach?

Potential customers will generally make a buying decision after 7-10 touchpoints and around 30-60 days of retargeting.

how long does it take to acquire customer graphic by customer acquired

What is Customer Acquisition Cost (CAC) and why does it matter?

Understanding your cost to acquire a customer is essential information for your business to grow. Basically, once you know how much it costs to acquire a customer you can easily forecast how much you will spend on marketing to reach your financial goals. Knowledge is power and without knowing how much you will spend to acquire a customer you won’t be able to make changes needed to keep you in business.

How do you calculate your Customer Acquisition Cost?

The easiest way to calculate your Customer Acquisition Cost (CAC) is to take your marketing spend plus any additional expenses for this quarter and divide that by the number of new customers you acquired this quarter.

Don’t worry about busting out the calculator, I’ve created a simple tool for calculating your customer acquisition cost.

Customer Acquisition Cost Explainer

Why should you start tracking Customer Lifetime Value (CLV) in your business?

It’s important for all business owners to measure and understand how valuable a customer will be for their business. Understanding your average customer lifetime value gives you an idea of how much you should spend to acquire a customer.

The most important metric to pay attention to while growing your business is the ratio between the acquisition cost and lifetime value. It’s important that your cost to acquire a customer is less than the amount of money you will make in the lifetime of a customer.

If you want an easier way to calculate the average lifetime value of a customer, check out our Customer Lifetime Value Calculator.

What’s a good CAC to CLV ratio?

Most startups aim for three times the cost of acquiring a customer. This means that if you are getting less than 3:1 you should try adding upsells, update pricing, get better at marketing or simply call it day.

How do you determine the lifetime value of customers?

In most cases, this will be a simple process if you have accurate data. Here’s what you will need to calculate your Customer Lifetime Value:

  1. How much revenue on average does a customer generate per year?
  2. How many years on average do you retain a customer?
  3. How much did it cost to acquire this customer?

Now we can determine the average lifetime value by filling out the following formula:

(Annual Revenue × Lifetime) - Acquisition Cost

Which marketing channels should you use?

It all depends on the type of audience you are trying to attract. There are two types of marketing channels you should focus on, that’s paid acquisition and organic acquisition.

Organic Acquisition

  • Content Marketing
  • Email Marketing
  • Referrals
  • Social Marketing
  • Webinars / Podcasts

Paid Acquisition

  • Search Ads
  • Social Ads
  • Influencers
  • Paid Reviews
  • Affiliates

Does it all come down to Sales Funnels?

Yes, because a sales funnel is simply a guided buying process. If you have defined your target market, buy persona and customer acquisition cost all that is left is created a sales funnel to increase your cart size. Online sales funnels are divided into several steps, which you can model from my systematic customer acquisition strategy.

via GIPHY

Conversion Based Sales Funnel

  1. We have caught the user’s attention! Depending on where the user comes from, then we show them one of our targeted landing pages.
  2. We start the education process for our new prospects on the problem we are trying to solve, our benefits and why we are different.
  3. Now that the user understands our value, we provide testimonials, case studies and more to build trust.
  4. Finally, we test the commitment of users with frontend products.

The Funnel Breakdown

A sales funnel is simply a series of actions designed to nurture your leads into and through your funnel. Let’s discuss exactly how you can use this more advanced sales funnel to start getting targeted leads that you can turn into loyal customers.

  1. Advertise on the right platforms
  2. Create targeted landing pages
  3. Test multiple versions of your ads and landing pages
  4. Make sure you have a smooth checkout experience
  5. Give customers a special upsell offer to increase cart value
  6. Send cart abandonment emails to customers that backed out
  7. Use follow-up funnels to recapture lost leads
  8. Continue to use drip email campaigns to nurture leads
Sales Funnel Breakdown

Nurture leads and close deals

Treat your leads like a crush, if you care about that person you will keep in touch and do whatever it takes to win them over.

  • Opt-in Follow-ups
  • Cart Abandonment Recovery
  • Product Announcements
  • Purchase Reminders
  • Retargeting

Drip Campaigns

Drip marketing is a communication strategy in which you send or “drip” a pre-written set of messages to customers or prospects over time. These messages often take the form of email marketing, although other media can also be used.

  • Educational
  • Onboarding
  • Lead Nurturing
  • Re-engagement
  • Promotional

Don’t forget about Customer Retention

Business owners will often make the mistake of solely focusing on acquiring new customers. If your cost to acquire a customer is expensive, retaining customers that continue to pay will be much more profitable for your business.

Growing your business will require you to keep your customers happy. Don’t be the company that “forgets” to respond to support tickets and lets bad reviews pile up. Customer retention will be a key component to your success so keep that in mind when deciding how to spend your time.

Try our Customer Retention Rate Calculator to find out what percentage of customers you are retaining.

The right tools for the job

If you’re going to build an online sales funnel, you’ll either need to hire a web developer or use one of the following online tools:

  • ClickFunnels – Get a 14-day free trial with this link!
  • Simvoly [Our Pick] – Great sales funnel builder at affordable price
  • ThriveCart – Pay once and get all the updates for this checkout builder
  • SamCart – Another good lookin’ lifetime checkout builder
  • Kartra – A ClickFunnels competitor from the people of EverWebinar
  • Shopify + Zipify OneClick – A good combo if you prefer Shopify (pricey though)
  • WordPress + Woocommerce – Basic option for people who prefer WordPress

Please note: A few of these links I am an affiliate for, which means I will make money for referring these products. That being said, I do not recommend products that I don’t personally use and enjoy using myself, no matter how much I’m paid. Using these links does help support this website and I appreciate you using them if you decide to try any of these sales funnel builders.

Final Thoughts

Hopefully, I’ve helped you understand customer acquisition as a whole. Stick to a nurture-driven process and use data to drive decisions and you’ll be just fine. How do you plan on acquiring customers? Let me know your thoughts in the comments below!

Disclosure: This post may contain affiliate links. This means I could make a commission from your purchase.

Drew has spent years building software, selling physical products online, and providing expertise to companies such as Disney, Paramount Pictures, and many more. Throughout his career, Drew has learned extremely powerful marketing and SEO strategies that have helped him increase traffic and acquire more customers.

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