The growth and sustainability of startups and small businesses depend on attaining new customers.
The cost per acquisition (CPA) metric shows how much you spend, on average, per paying customer. Keeping CPA as low as possible can be a matter of survival for most startups that don’t have big budgets – every penny counts.
In this article, we’ll look at steps to take in order to optimize your startup’s customer acquisition costs.
Keep Track of Your Customer Acquisition Costs
To calculate your cost per acquisition, you need to divide the total cost of marketing by the total number of customers.
To illustrate: If you spend $2,000 on your marketing strategy and gain 100 new customers, your acquisition cost – the amount you’re spending on each customer – totals $20.
To keep better track of your customer acquisition cost, you should also measure:
- Average customer lifespan: this indicates customer loyalty. It is measured by dividing the sum of every customer’s lifespan by the number of customers.
- Customer lifetime value: this shows how much each customer has spent on your business during their lifetime. You calculate it by multiplying their average lifespan by their value.
- Average purchase value: this shows how much your customers spend on average. Calculate it by dividing your total revenue by the number of purchases.
Boost User Value
Providing user value means your business needs to generate something that is useful, pleasing or highly sought after by your customers.
This may be anything from new feature enhancements or new product additions that customers were expressing interest in to implementations that improve your existing services for better positioning.
The levels of customer satisfaction always go hand in hand with a high retention rate.
Make Relevant Content to Target Your High-Value Leads
Today’s prospects and customers want content to be highly relevant and personal to them.
This is a critical consideration for all your sales and marketing efforts when looking to keep your cost per acquisition minimal.
The more you need to convert leads into customers, the higher the customer acquisition cost will be. Through untargeted content, you risk attracting low-quality leads that will soon leak out of the conversion funnel.
To attract qualified prospects and high-value leads, create detailed buyer personas by collecting customer data through subscription forms, polls, surveys, online quizzes and social listening.
You can use their demographic and psychographic data to segment your audience, develop personas and serve different content according to their interests, pain points, location, education and other data.
Nurture Leads and Automate Your Marketing Processes
Email drip, lead nurture and other marketing automation techniques are effective at reducing customer acquisition costs.
Promoting a white paper or handing out a free trial via a paid media campaign, then using emails acquired in a lead nurture, is one example of marketing automation.
The leads are in your funnel’s certain stage and they are expecting you to offer them some value. A lead nurture workflow can help you convert them into customers.
Create a Conversion Rate Optimization Strategy
A well-defined conversion rate optimization (CRO) strategy is needed to gradually convert your prospects and leads into customers.
To do this, follow these best practices:
Show social proof: When making a purchase decision, customers rely on online reviews, making social proof an essential part of your CRO strategy. In this regard, you can:
- Enable customer reviews and ratings on your website.
- Use social proof software and tools that show website visits and generated leads and conversions in real-time.
- Encourage customer testimonials and display them on your website.
- Create case studies that explain how your business solved your customers’ problems.
Make your website easy to navigate: Overly complex and unintuitive website navigation frustrates visitors. In order to optimize your navigation:
- Reduce the number of categories and subcategories on your site.
- Make your navigation sticky.
- Include a search bar and filtering options if you have multiple products.
- Use legible fonts, lots of white space and concise copy.
Offer proof of your website’s safety: For companies that require users to provide sensitive data, this is a vital point. Cybersecurity concerns are gaining momentum amid online safety threats, especially in the eCommerce business. Before buying from you or leaving any sort of sensitive personal info, your customers will want to know whether it’s safe to do so. Provide them with proof of your SSL certificates and display trust signals on your website.
Test Your Landing Pages
Create several variants of your landing pages to capture leads, then perform A/B testing to find out which one is most effective.
These tests can have a vital impact on your conversion rates, which impact your customer acquisition costs. By looking at analytics metrics such as bounce rates and time spent on page, you can make informed decisions about changing elements such as button color or CTA text.
Any creative digital agency’s best practices dictate that you should run landing page A/B tests for two to four weeks in order to gain statistically significant data.
Turn Your Customers Into Brand Advocates
A business hasn’t fully exhausted its digital marketing capacities until it has turned acquired customers into brand advocates.
Increasing your existing customers’ brand loyalty is the other half of the CPA optimization battle. It may take a lot of time and effort to retain a customer, but the outcome is worth it – retaining a customer is five times cheaper than getting a new one.
By building a community of brand advocates, you get a lot of free word-of-mouth marketing which will further cement your brand authority, boost sales and return your acquisition costs faster.
To nurture your customers into loyal brand ambassadors, you can:
- Build a customer loyalty plan: A loyalty program rewards customers who buy from you continuously. The practice of giving incentives to such customers keeps their levels of satisfaction high because you show them you care about them. It is up to you and the nature of your business to decide whether you will instate a tiered loyalty program, points program, value-based program or another type of program.
- Be socially responsible: A startup brand should exert core values that go beyond products, services and sales pitches. Customers align themselves with companies that share their values and missions. By forming a social responsibility program and giving back to your community, you project a favorable and relatable brand image that your customers will want to get behind.
- Indulge in social listening: Keep track of your brand’s product mentions on social media to get insight into customers’ opinions of you. Create customer satisfaction surveys on your website, social accounts and email and use the feedback you get to better your products, marketing and customer support.