Customer acquisition refers to the practices businesses use to gain new customers and clients. This involves making potential customers notice them and persuading them to purchase the company’s products and services. An important metric in this process is the Customer Acquisition Cost (CAC), which helps determine the value each customer brings to the business. Customer acquisition management is the link between advertising and customer relationship management, as it facilitates the process of turning members of the public into customers who have a relationship with the business.
What is the customer acquisition process?
The methods of customer acquisition have a lot of overlap with marketing and sales techniques. The first step in customer acquisition is understanding and finding high quality potential customers - once identified, these are called leads. The methods include advertising, call centers and mailing lists, which help to determine people who are interested in your products. As these leads are qualified further by the sales funnel, they become prospects and are often assigned to sales people who can create a relationship with them.
The sales team is not merely there to serve the stated needs of customers, but also to identify needs they may not have mentioned (or may not even know they have). That way salespeople are able to offer additional products or higher value products that better serve the customer and secure their relationship with the business.
What is the customer acquisition cost and why is it important?
The Customer Acquisition Cost (CAC) is the price that a business pays to secure each customer. If the CAC becomes higher than the profit generated by each new customer, then it is no longer economically viable to grow the customer base. The simplest calculation is to divide the total costs of all customer acquisition by the total number of new customers, across a specified time period. Equally important in determining the viability of the customer acquisition strategy is the lifetime value of a customer, which helps to determine the ROI of all of the sales and marketing strategies over longer periods.
What are the benefits of customer acquisition?
Customer acquisition is a vital part of growing a business and building a customer base. Properly managed customer acquisition strategies are cost effective and allow businesses to acquire high value customers, which in turn creates a healthy income stream. Without proper customer acquisition, a business cannot generate the cashflow and capital necessary to invest in its products and infrastructure so as to make a more compelling offering.
New companies need to focus a greater amount of attention and resources on customer acquisition, whereas established companies may focus more on customer retention. Customer acquisition is generally more costly than retaining customers who have already been acquired, but businesses need to determine the distribution of profit across a customer’s lifetime as well to make a proper analysis. If a customer generates significantly more profit at the start of their relationship with a business, then customer acquisition may still provide higher value than customer retention.