Customer acquisition cost is the approximate cost associated with winning a new customer. Typically, these costs are largely related to marketing. Companies must consider customer acquisition costs when they estimate their approximate expenditures, as it is a very important expense for many businesses. Breaking down these costs can also help you determine how you can reduce them. While it is prudent to be careful of how you go about reducing customer acquisition costs, it is often very feasible.
1. Reducing Labor Costs
Many labor costs can be categorized as customer acquisition costs. Most notably, any labor costs associated with marketing are customer acquisition costs. For example, payment for outreach professionals, SEO bloggers, and website designers could all be considered customer acquisition costs. While many of these may be necessary costs, it may be helpful to regularly assess these labor costs and prioritize them.
For example, if you find that cold-calling is not doing much in the way of generating leads, but an affiliate program on social media is providing very successful results, it may be worth it to eliminate costs related to the former, and perhaps even redirect that funding into your more successful social media efforts.
2. Implementing Automation
Beyond elimination or redirection, another way that your business can significantly reduce labor costs related to customer acquisition is by automating processes where possible. This is particularly feasible and useful in cases where a relatively routine action needs to be done on an ongoing basis, such as email outreach campaigns and regular IT maintenance. By doing this, you can eliminate the need to pay someone to handle these tasks manually, or at the very least allow one person to handle more tasks more easily. An additional benefit of implementing automation is that it reduces the business impacts of human error.
3. Establishing Transparency
Clear communication with potential customers can improve the chances that they understand your product or service and how it may benefit them. It may also reassure them about any misgivings such as expenses and security practices. As such, by being as transparent as possible upfront you theoretically may be able to reduce customer acquisition costs by winning them faster with fewer hurdles.
For example, a potential customer who is very concerned about security may turn first to a company that strongly promotes its focus on security in its advertising. Or, a customer who quickly understands the parameters of your seasonal deals through your advertising may be less likely to contact your business for clarification, which may take up some of your employees’ time on the clock.
4. Prioritizing Customer Retention
If you focus on developing the quality of customer relationships that you already have you may improve customer retention. If your customer retention strategies are reasonably successful, you could give your business some wiggle room to reduce costs related to customer acquisition, such as lead generation efforts. It is an ideal position for a business to be in if it enjoys a solid, loyal customer base rather than a constant influx of low-quality leads.
A few good strategies for customer retention include:
- Checking in with customers regularly;
- Asking for customer feedback;
- Offering discounts and rewards;
- Creating a loyalty program;
- Educating customers about your services and offerings;
- Employing personalized communications and offerings;
- Developing good customer service protocols and resources.
5. Analyzing Customer Data
By analyzing customer data, you can improve your marketing strategies as well as customer retention. This optimization can reduce the overall ongoing effort and resources that need to be invested in marketing, as it places focus on the quality of leads rather than the quantity. Customer data analysis can even improve the value of your leads by identifying their needs and potential upsell opportunities.
Categories of customer data that are often helpful to gather and analyze include:
- Contact data;
- Demographic data;
- Behavioral data;
- Engagement data.
6. Regularly Reassessing Your Business Practices
In general, it is a good idea to regularly review your business operations and best practices to ensure that no sources of financial drain develop or go unnoticed. Additionally, it is always possible that more efficient methods may emerge that could optimize your operations.
Customer acquisition practices and resources are no exception. For example, your primary source of lead generation may change from cold-calling to referrals, your available funding may diminish, or a new network discovery process may present a chance to optimize your in-house network management. These scenarios all present a need to make adjustments or an opportunity to improve, which can reduce costs or increase the payoff of your investments.
7. Optimizing the Onboarding Process
Optimization of the onboarding process goes hand-in-hand with transparency and customer retention. By ensuring that customers know what to expect and how they can most benefit from your products and services right out of the gate, you can focus on developing good quality customer relationships rather than having to expend a lot of resources on lead generation.
For example, if you do not advise a new customer about your contact schedule during onboarding, they may feel as though there is an uncomfortable gulf in communication, which may cause them to trust your business less. By ensuring that you do include such information during client onboarding, you can improve the chances that your new client will feel confident in the business-customer relationship, and you will also convey a sense of professionalism. Client onboarding should be a comprehensive and structured process that covers all elements relevant to the client relationship, such as contact information, scheduling, networking and IT systems, security protocols, pricing, and guarantees.