Tips for Reducing Customer Acquisition Costs (CAC)

 

Regardless of network, it is apparent that the digital sector has become a competitive one for enterprises. 

Every brand on the internet is vying for the same consumers' attention (in some way), making effective marketing to your target customer more challenging. 

Furthermore, the average cost of pay-per-click commercials is rising.

It is critical to ensure that your systems and processes for acquiring new clients through these channels are cost-effective.

Aside from launching or sustaining carefully planned paid advertising campaigns, 

there are some strategies you can utilize to reduce your client acquisition costs, 

or at the very least make that figure sustainable and scalable over time.

So, in this piece, I'll define customer acquisition and customer 

acquisition cost (CAC), explain the difference between CAC and CPA and provide 11 strategies and tactics you may use to reduce your customer acquisition cost.

What is customer acquisition?

It implies acquiring paying clients for your company, just as it sounds. 

It does not, however, apply to the single action of clicking "buy" or signing a contract.

 It covers the entire journey from prospect to paying customer.

For some firms (particularly e-Commerce), that road may be brief, with few stops along the way. 

Others with a lengthier sales cycle may have to wait weeks, months, or even years.

Regardless, a customer acquisition strategy attempts to make every step of the client acquisition process as easy as possible

 allowing you to achieve the highest potential conversion rates.

Building up and understanding your company's funnel is one of the most difficult tasks any marketer can take on, 

especially when you don't have the data to back up your judgments. We'll get to that later, but first, let me explain the distinction between CAC and CPA.

Customer acquisition cost vs cost per acquisition

We must emphasize that customer acquisition cost (CAC) is not the same as cost per acquisition (CPA).

What is customer acquisition cost (CAC)?

Your customer acquisition cost calculated by dividing your total advertising spend by the number of new customers gained as a consequence. 

CAC is the most significant parameter for executing direct-response advertising campaigns, 

although it often used to measure the success of your marketing at the business level, rather than the campaign level.

What is cost per acquisition (CPA)?

The cost per acquisition, on the other hand, is a campaign-level measure. 

CPA is simply the cost of acquiring a lead (anyone other than a paying client), whether through a material download, free trial, demo request, or any other type of contact information input with intent.

CPA is crucial in the overall scheme of things, but the conversion rate across the funnel is more so. 

Assume you're generating leads for a sales demo or consultation. 

Although this lead type is considered low-funnel, there may be a significant disparity in how many leads convert on this activity and how many of them become paying customers.

Depending on the nature of your organization and sales processes, 

you may be able to accept a higher CPA if the conversion rate and return on ad spend are good. When competing for premium ad real estate with other firms, this becomes critical.

As previously noted, if you are running e-commerce advertisements, the difference between CAC and CPA may be negligible because you can see whether your ads are making you money instantly.

The first action a user may take is to visit your online store and make a purchase.

How to lower your customer acquisition costs

In this section, I'll go over strategies and tactics to help you reduce your client acquisition costs, or at the very least, 

start thinking about how to enhance the overall efficiency of your marketing funnel.

1. Have tracking in place

I cannot emphasize how vital it is to have precise tracking in place. 

You need to know which traffic is coming from which channel and, preferably, which campaign, from ad click to website visit, lead, and customer.

Don't merely direct customers to a landing page without first enabling conversion tracking on each platform.

That is where you will be able to obtain the baseline CPAs and optimize the campaigns themselves.

It is critical to be able to tie performance to specific campaigns,

 whether you utilize individual landing pages or forms relevant to the channel you are advertising on or construct UTM parameters. 

Also, remember to build up conversion values so that you can immediately link paid advertising expenditure to leads in your pipeline.

2. Set a baseline

Given the significant disparities across firms and sales cycles, determining your CAC may take some time. 

If leads enter your pipeline but take months to convert to clients, you may appear to be losing money for some time.

This is why it is critical to establish baseline conversion rates for your promotions, channels, and platforms. 

You can begin to reliably anticipate the CAC if you learn the average conversion rates across your funnel.

3. Align your ads accordingly

Yes, leads obtained through a demo request are far more likely to become paying customers than leads obtained through a content download.

 An ad providing a free trial for a project management platform, 

on the other hand, is unlikely to do well among individuals looking for project management advice or templates. 

In this case, it might be more appropriate to market a free guide or template. 

Based on who engaged with each preceding ad, you may then build retargeting advertisements for gradually lower-funnel offerings.

4. Have a clear path to conversion

This section could have  titled "optimize your funnel," but it would oversimplify the argument I'm attempting to make.

 The minor components of promotions or offers make up the larger framework of the marketing funnel.

In addition to ensuring that your offers correspond to your consumers' 

state in the funnel, you should also ensure that your subsequent offers correspond to the path they are most likely to take. 

For example, the top of your funnel could include content downloads, 

but you could have numerous distinct types of content.

 It was critical to strategize that content and align it with the target audience's needs, as well as to provide a direct path to sales from that conversion.

And then, be sure to strategize your subsequent offers. 

Leads that download guide A might be interested in a different retargeted ad offer than leads that downloaded guide B, or who used your free tool.

Create progressive, but obvious, conversion routes based on your sales cycle and the offer that generated the lead. 

In this manner, you can avoid drop-offs in lead-to-sale conversion rates.

 For example, a material download that is only distantly related to your product or service may require numerous more small conversions before it converts to a customer. 

You want to plan out each layer of your marketing funnel so that it exactly aligns with sending prospects to sales at the right speed.

5. Use landing pages

There are techniques to boost conversion rates without changing a single landing page, but this should not be your entire plan.

Many people are still not using them, in my opinion. 

In other words, they construct ad campaigns that bring people to their website in the hopes that they would convert.

 Even if your website is conversion-optimized, 

I advise against doing so because there are too many options on your website that can

(and will) distract the user from converting to the action you are targeting with your ad.

Create landing pages that are relevant to the offerings in your ads, with the single CTA on the page being the action you want customers to take.

And this is where you can incorporate critical facts in your landing page copy to address any reservations, communicate your value offer, and increase conversions.

6. Optimize your website and landing page experience

For decades, one of the most prominent topics of conversation has been the online experience. 

Books, blogs, movies, and webinars have all emphasized the critical role that your website plays in turning prospects into consumers.

First, your ad and landing page must be completely consistent (learn more in our landing page tips). 

The copy and visuals should have the same look and feel and convey the same idea.

There should be no cognitive dissonance between these two elements. 

The ad should exactly aligned with the page to which users are directed.

 This is one of the simplest methods for increasing conversion rates and lowering customer acquisition costs.

7. Get into the weeds of conversion data

Whether it's through Google Analytics data or the conversion statistics supplied within advertising platforms (YouTube Studio may surprise you), 

it's critical to understand as much as possible about the conversions that are taking place, such as:

• What time of day is it?

• Which weekday is it?

• What are the devices?

If you find that the majority of your leads convert between the hours of 9 a.m. and 5 p.m., 

Monday through Friday, schedule your advertisements to run solely during those hours to get the most out of your ad spend and minimize your CAC.

If you notice that desktop users are more expensive to acquire but of higher quality, 

you should allow yourself to spend more money on acquiring these people and delete or separate mobile users totally.

Get into the weeds with your conversion statistics so you can spend more only where and when you need to, rather than increasing total costs and wasting money.

8. Check your placement settings

There are various layers to a great paid ad approach that may require several blog posts, but a lot can accomplished simply by paying attention to how your campaigns are set up.

The first detail to double-check is the placements targeting on Facebook or YouTube.

Many businesses, for example, will run direct response campaigns with the “automatic placements” feature activated at the ad set level:

This includes the “Audience Network,” which will serve your Facebook ads across other app assets.

Historically, the Audience Network has resulted in relatively low-quality clicks and few, if any, conversions. 

Although Facebook's algorithm designed to produce the maximum results for a given aim, there is frequently a significant amount of money wasted on Audience Network placement.

9. Check your location settings

Location targeting in Google Ads is another example of a campaign setting that might influence CAC.

 When you browse through the settings for your search campaign, you will discover a section for locations:

If your company needs to deliver advertising to people in a specific location, 

expand the locations tab and pick "people in or often in" your target area, then specify any necessary exclusions.

Often, the simplest things in the layout of a paid advertising campaign can have the greatest impact on the quality of leads you drive through it—and, ultimately, your CAC.

10. Use bidding strategies

Your bid strategy is the final aspect of paid advertising that might affect your customer acquisition cost.

 Using bid tactics (at least within Google and Bing) can significantly enhance your base CPA and, as a result, your CAC.

Target CPA bidding has proven to be an efficient approach for maintaining average costs for sponsored search ads with campaigns that have enough conversion data.

Of course, there are many more aspects and levels to the funnel than the prices at the top, but you should take advantage of every opportunity to improve these KPIs. 

When deciding how competitive to be, keep the audience (or keyword) and the funnel/promotion in mind.

11. Create great content

You can't get away from it. 

Content is always the key to marketing success. 

The guides and collateral you create, the copy on their landing pages, and the ad copy that promotes them (and other non-content offers).

Conclusion

As you can see, cutting client acquisition cost (CAC) 

requires boosting conversions and lowering the cost of those conversions (CPA) throughout your whole funnel for organizations with a longer sales cycle. 

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