Consumer-focused businesses often shoulder high customer acquisition costs to spearhead rapid growth. These companies willingly lose money on a customer’s first purchase and only begin to profit if the customer repurchases in the future. While this strategy can facilitate growth, it can quickly spiral out of control and negatively impact the health and longevity of a business.
As a best practice, executives should always look for various ways to lower customer acquisition costs. Some successful strategies include: bundling to increase Average Order Value (AOV), investing in Search Engine Optimization (SEO) to generate organic traffic, creating referral programs, improving customer retention, providing subscription offerings and optimizing content production and messaging.
When implementing such strategies, company leaders should always look at their businesses from a holistic point of view. For example, if SEO becomes a profitable channel, executives should not necessarily cut out other channels that are more expensive and/or operating at a loss. Rather, they can take a portion of the profit from SEO to help offset the high customer acquisition cost of another channel (e.g. digital advertising costs). This way, the company can keep overall marketing expenses in check and still achieve high growth in a sustainable manner.
To help businesses struggling with increasing customer acquisition costs, I asked members of the Forbes Business Council E-Commerce Group, a community I am fortunate to lead, to share their effective strategies and methodologies.
1. Invest in a long-term SEO strategy.
SEO is a long-term strategy to reduce customer acquisition costs by increasing website visibility and ranking on search engines. It requires an upfront investment of resources but can pay long-term dividends. Ranking on the first page, especially the top three results, is crucial as customers rarely go beyond it. Additionally, ads, video and snippets can push organic results further down the page. – Onikepe Adegbola, Casa de Sante
2. Focus on customer retention.
Retention lowers consumer acquisition costs. Provide excellent customer service, respond quickly to customer issues, offer loyalty benefits and create a positive customer experience. Content marketing and focused advertising can also reduce customer acquisition costs. – Shaan Rizvi, Plaxonic
3. Build retailer partnerships.
Suppose you develop a protein bar and are able to sell it at Target — you’d get their traffic for free, which is exciting! To do that online, you simply need retailer partnerships. Go into your e-commerce platform, look at their catalog of apps and search for “partnerships.” Now you can put your products into traffic on other stores at no advertising cost. – David Perry, Carro
4. Have an integrated solution between buyer and seller.
The best way to reduce customer acquisition is to have none by providing a service that is built into a company’s customer acquisition platform and doesn’t require a change to the standing operating procedure. As an integrated solution between buyer and seller, the costs are not ours while we profit from all parties. – Ellen Calmas, Neighborhood Pay Services / NPS Rent Assurance
5. Consider the barbell model.
Reduced customer acquisition requires thorough analysis and evaluation. For many businesses, there are two types of customers: new and repeat. There are also customers who refer business and those who don’t. Usually, acquisition costs are reduced with repeat customers who refer. So, switch from a new customer funnel model to the more efficient customer barbell model, and build your winning model. – Jerry Cahn, Age Brilliantly
6. Combine great copy and media in one central control.
Let’s get specific: If you’re running paid traffic, combine winning creative angles (ie. copy and media) into one central control and shorten the message to get straight to the point. Currently, 15-30-second square and vertical variants tend to outperform longer or 16:9 aspect ratios. If you’re relying solely on organic traffic, partner with previous clients to mail their database with a custom deal that helps them shine. – Jeremy Finlay, Quantiem.com
7. Capture customer contact info at points of sale.
Capturing customer contact info at the point of sale via e-receipts gives brands the data they need to identify frequent shoppers and cultivate relationships with them. This can help to keep existing customers engaged and coming back, rather than constantly having to acquire new customers, which is ultimately the best way to combat customer acquisition costs in retail. – Stephan Schambach, NewStore