As digital commerce brands grow and begin to spend across new marketing channels, understanding how to get the most out of that investment is an important element of healthy, sustained growth. One metric that brands need to understand is Customer Acquisition Cost, or CAC. The formula for CAC is explained by the figure below, but simply put, on average how much do you have to spend to get a new customer to try your brand? This is slightly different from Cost Per Acquisition, or CPA, which measures the cost to acquire a lead.
The places where customers encounter new brands are shifting constantly. Channels that were effective at reaching your target customer 6 months ago may no longer be relevant. Every additional dollar spent in an underperforming channel is a dollar that could be better used. Monitor which channels are driving the most revenue and shift resources accordingly. Don’t be afraid to test out new channels, and to pull the plug if results aren’t good. Finally narrow your target audience - creating advocacy with early adopters will lead to higher conversion rates.
One of the most effective forms of marketing is a referral from a trusted source - this is one reason why influencer partnerships have become so popular in recent years. At a more grassroots level, consumers trust the opinions of their family and friends. A thoughtfully constructed referrals program can be a low effort, high return strategy. We’ve listed some tips when thinking about setting a referral program:
- Ensure your program benefits both new customers and loyal fans, to incentivize use.
- Make information about the program easy to find and understand.
- Embed referrals links during the entire customer journey e.g., pre- and post-purchase
Just as consumer tastes change, so too should your approach to content marketing. While it is important to develop a consistent, recognizable brand voice, the ability to remain agile is also critical. Effective content means higher traffic per dollar of spend, which should lower your CAC.
- Experiment with different types of blog posts, newsletters, social content etc.
- Track which individual campaigns and activities resonate to inform where to throttle your efforts up or down
- Invest in a content testing strategy to identify which changes work for you
- Explore using personalized content for different customer segments
Just because a purchase isn’t made on the initial engagement with your brand doesn’t mean that the lead should be considered cold. In fact, consumers who have already chosen to engage with your brand are often the best bet for future conversion. There are many ways to re-engage customers:
- Set up retargeting ads
- Email marketing for customers who’ve engaged with your website or mailing list
- Sharing a personalized offer at the right time to nudge customers
You should aim to create as frictionless an online shopping and purchase experience as possible so as not to lose a potential sale near the finish line. There are three pillars of the customer journey you can think about optimizing:
- Finding: Search optimization should make it easy to get to your website, and navigation through the site should be intuitive.
- Considering: Your site should showcase your distinctive brand, with compelling merchandizing of products, and a thoughtful and clear structure around pricing.
- Buying: Barriers to purchase should be as low as possible, with consistent availability of advertised products and clear communication around service and delivery.
It is important to note that CAC should not be the only metric considered when thinking about marketing mix and optimizing brand investment. Customer Lifetime Value (LTV) is another important metric used to understand how much value a customer brings to the business over the duration of their relationship with the brand. Used in tandem, LTV:CAC ratio is a great indicator of how much value you can expect from a given customer per marketing dollar spent.
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