Together.do article series
In every industry, the cost of customer acquisition is high; it is, in fact, one of the main expenses for an online business. You must be familiar with the CAC metric if you run a data-driven company. It shows you the average cost of acquisition per customer. It’s a powerful way to evaluate an acquisition channel for an entire business. With one glance at your CAC, you know how much money you need to invest to get customers.
Each business is specific, but with the large amount of data available today, one can estimate the average CAC of companies across industries. And when you do that, you realize that the cost to bring customers to your business is high across the board.
For example, Shopify conducted a study with 270 customers selling across different verticals and channels. They presented the result in 2021 (you can check the full study here.)
You can set business goals and quickly estimate how much it will cost to make it happen. For example, if you have a clothing line and want to sell to a thousand people, you must invest 1000 x $129 = $ 129,000. Using simple metrics is excellent because it gives you clarity fast. You draw a few numbers and know where you stand. It’s like in the movies when they do business on a restaurant napkin.
In our example, you must make at least $129,000 ( the same amount) from one thousand customers to avoid losing money.
But why is the average cost of acquisition so high?
The customer acquisition journey.
There are many ways to categorize and classify the steps that lead someone to become a customer. They all tell the same story in slightly different ways. In this post, we have chosen to describe the marketing and sales effort needed using four steps:
What do you need to get new customers?
· Awareness
Your potential customers have never heard of you; they don’t know you exist. They don’t know what you do. So you need to let them know. You need to gain awareness among your potential customers. It is the very first step; no one buys something unless they know it exists!
· Interest
Once people know you exist, you want them to be curious about what you do. Therefore, you need to spark interest in your potential customer. When you have their attention, it’s time to explain your business.
· Desire
Once they know you exist, they want to learn more about your offers. Do you solve their problem? Do you address their pain point? Do you ignite a desire to buy in your offers? Do you have something they want or need? At this stage, you must show your leads that you understand them and that what you have to offer is relevant to them.
· Action
You have guided your potential customer through all the previous stages. Your offer is a good fit for them. But can they trust you to deliver what you offer? Are you competitive on the market? To inspire action and transform a lead into an actual customer, you need to inspire action.
To sum up, your job to acquire customers consists of gaining awareness, sparking interest, igniting desire, and inspiring action. To achieve all that, you need to :
- Create relevant content that tells your story and makes an impact.
- Adapt your content to all the appropriate formats, such as videos, texts, audio, images…
- Spread your content on many platforms to increase your reach.
- Target your market with social media, search engines, podcasts, magazines, TV etc..
The goal is to be seen and heard by as many people as possible in your target market. The most common way to make it happen is through advertising.
The traditional advertisement method is broken.
The advertising model is broken and isn’t cost-efficient anymore for most D2C businesses. It became a burden for many of them. The investment needed to run successful ad campaigns can be intimidating. Every market witnesses an overwhelming amount of content and products. As a result, consumers are overstimulated and don’t pay attention to what is advertised.
For an ad campaign to be effective, you need a lot of exposure for an extended period. It is not sustainable; it costs too much money, except if you have a huge and engaged community to multiply your reach. Indeed, you can create content that goes viral, but viral effects isn’t a consistent strategy. It’s like the stock market, no one can predict market reaction.
According to Clayton Christensen, a professor at Harvard Business School, ”nearly 30,000 new products are introduced every year, and 95% of them fail”.
On Shopify alone, the number of new merchants in 2022 was about 250,000 bringing the number of sellers on the site from 1.750 millions in 2021 to 2 millions in 2022. Many of these merchants are well established companies with almost no budget limits. The competition for exposure is unfair.
And it will keep getting worse. As technological advancement makes creating new products and content more accessible, consumers will be overloaded. It’s an enormous flood of information to which we are constantly exposed. So how do you stand out?
Prices for ads go up, visibility goes down, and advertising platforms make more money the more we pay for ads. It seems like a vicious circle. How do we break from it?
Alternative acquisition strategies are cost-efficient.
It’s time to let go of the old model and embrace the new. We are entering an era of collaboration, creativity, and value as a currency. It’s time we realize that we can achieve more crafting solutions together! For example, collaborations, partnerships, and referral programs work. They are alternative ways to acquire customers; they are on the rise, with amazing results.
The idea is simple, leverage what you already have and add value. Change the currency. Don’t give money to advertisements to acquire customers. Instead, be creative and deliver more value.
Partnerships, done right, provide a tremendous amount of value while leveraging existing relationships and trust.
Partners with complementary offers have the potential to drive each other’s community from awareness to action smoothly. So, instead of spending to much money to acquire customers, leverage the power of co-acquisition with no marginal cost.
· Awareness
While paid acquisition is like cold-calling someone and rarely works. Bringing awareness with a partnership is like a warm introduction from one friend to another.
· Interest
Both partners know their audience and customers, they are qualified leads already. It is a significant advantage: they’re already interested in learning more about your new campaign and collab.
· Desire
We have spoken about that a few times; customers love to see collaborations. It ignites their desire to buy your products even more. It helps them connect and feel part of your community.
Collaborating is like saying to your customer, “I care about you; I’m always looking for creative ways to bring more value.”
· Action
Last but not least, making the sale. Perhaps the most essential, customers want to feel safe and secure about who they’re doing business with. They need to trust you to finalize the sale. Is it a good company? Is it going to deliver? What about quality? When you collaborate, trust exists already.
As you can see, partnerships make each step of the customer journey much smoother; the hard work of convincing someone out of the blue that he can trust you is already made. It’s faster, more efficient, and brings value. Co-acquisition is a really cost-effective strategy.
The cherry on the cake, people love to talk about new things and creative collaborations, so you’ll get free PR ! 😊
Ultimately, if you’re looking for a way to grow your business fast and cost-effectively, you must diversify your acquisition strategies. The price to acquire customers keeps rising. Embrace partnerships and co-acquisition. It’s highly effective, cost-efficient, and it sends a positive message to the market.
