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