What Are the 3 Components of Customer Acquisition?
I like to think that there are three parts to effective customer acquisition. The first two are getting more customers in the door and retaining those new customers. Then there's getting customers to visit more often over a longer period of time, or to spend more each visit in order to grow customer lifetime value.
If you want to start working on customer acquisition, consider thinking of it in terms of sources for acquiring leads, suggests Kevin Joyce, chief marketing officer of Milton, Georgia-based marketing company The Pedowitz Group. Potential sources include pay-per-click, organic search and many other channels. Evaluate each for cost, speed and quality of leads, Joyce suggests. Pay-per-click generates quick results, for instance, but can be expensive, he says, while search engine marketing costs less, but may take a while. After sorting possible acquisition strategies by speed, cost and quality, Joyce suggests trying the most promising to see what works.
To introduce a beauty brand built around a new eyebrow gel called Wunderbrow, Michael Malinsky, founder of London-based KF Beauty, relied on social media advertising featuring user-generated demonstrations of the makeup's special features.
"What makes it different is it's waterproof and transfer-proof and lasts up to three days," Malinsky says. "That was the premise we went to market with."
Acquiring customers in this fashion is not inexpensive. KF Beauty spends $80,000 or more daily on Facebook ads, Malinsky says. However, customer acquisition was speedy. Wunderbrow sales grew eight-fold from 2015 to 2016, he says.
The Retention Component of Customer Acquisition
It's generally easier for a company to keep customers than to find new ones, Joyce says "When you get a new customer, you have two sales," he says. "You have to sell them on the product or service and you have to sell them on you as a company. With retention they already know the product or service and they know you. The sale is to get them to come back.
—Kevin Joyce, chief marketing officer, The Pedowitz Group
"The number one way to get somebody to come back is to offer fantastic service," Joyce continues. "That's the dominant factor in getting customers to return—being more responsive."
Efficiently handling basic services (such as shipping deliverables promptly) and defusing problems is especially important because social media gives user reviews potentially significant influence.
Businesses can also boost retention by adding offerings, such as training, that encourage tighter relationships with your business. "Get deeper and wider and more embedded in the organization," Joyce advises. "When there are barriers to exit, it's harder to go to the competition."
Customer Growth: The Final Component
Not all businesses can expect customers to spend more each visit. Some may receive most of the lifetime value of a customer with the initial sale, Joyce says. Those that employ subscription models may anticipate only stable transaction values each time a customer patronizes a business. However, even subscription businesses can increase sales dollars per customer by extending the length of the relationship via retention.
One approach that can get customers to spend more per visit is to introduce new offerings. Malinsky says customers consume Wunderbrow at varying and hard-to-influence rates.
"We can't expect somebody to buy every single month religiously," he says.
Nor are customers likely to purchase larger quantities each visit. So they've created a dozen new products to sell alongside eyebrow gel.
New add-on products don't have to be distinctive to be effective. For example, many customers lured by Wunderbrow's long-lasting claims have also been buying an application brush since Malinsky started offering it.
"It's an impulsive $9 purchase, but about 20 percent of people purchase this brush," Malinsky says.
Following Up On Near-Misses
The optimum recipe for customer acquisition, retention and lifetime value maximization probably varies for each business. A business-to-business marketer's solution may differ significantly from a formula successful in a business-to-consumer model.
But both Malinsky and Joyce say a common element of customer acquisition success is staying in touch with prospects and customers who drop out at some point in the process.
It can take months from the time a B2B customer visits your website before you get an order, Joyce stresses. Businesses that only pursue leads that are ready to buy may miss out on sales that could be realized if they stayed in touch with and nurtured relationships with near-misses.
"It's important to understand the value of nurturing to feed the acquisition funnel," Joyce says.
Malinsky agrees. If they spend $100 and get 1,000 views, 10 clicks and a single customer, they don't write it off as spending $100 for one sale, he says.
"The reality is you have nine people who visited your website and 999 who saw your ad and are more aware of you than somebody who hasn't seen your ad," he says. "Trying to re-approach that group correctly and keeping a very close measure on that group is what allows us to grow."
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