Acquiring customers is one of the most important steps in running a business. Without customers, it could be impossible to generate revenue. So how does a startup find customers to help the business grow? In this blog, learn strategies to help find the right customers for your business.
Customer acquisition is the process of bringing in new customers or clients to your business. There are many strategies businesses can implement to acquire new customers, but many mistake the process of customer acquisition as marketing. Marketing aims to drive awareness, but acquisition aims to drive conversions of a specific metric, such as purchasing decisions. Some businesses require more steps beyond awareness to convert a potential customer to an actual customer.
The Customer Acquisition Funnel
The customer journey is commonly depicted with a funnel – many potential customers enter at the top of the funnel, while only a few of the potentials become customers. Potential customers enter the funnel with awareness – they know about your company and your product or service. Once they are aware of your product, they consider purchasing the item. Does this product or service meet my needs and my budget? After they have considered the product, the potential customer will make a purchasing decision – either they purchase the product, or they do not. If they choose to purchase your product or service, they become a customer.
Customer acquisition encompasses the entire funnel – it is not just awareness of your product or the final purchasing decision, but the entire journey from awareness to decision. There are many strategies businesses may choose to implement to further their customer acquisition efforts.
Customer Acquisition Strategies
There are many customer acquisition strategies. While this is not an exhaustive list, here are a few customer acquisition strategies you may have already encountered.
The Freemium model is a customer acquisition strategy that involves giving potential customers a “taste” of the full product. For example, Google accounts come with 15 GB of free storage in their storage cloud, Google Drive. This allows Google users to get a feel for the product, with a limited amount of storage space. Users have the ability to become paid customers of Google by purchasing additional storage or upgrading their account to Google One, which comes with 100 GB of storage. If more storage is needed, users are theoretically more likely to upgrade their storage allotment instead of transferring the existing files to a new cloud storage system.
Once potential customers have entered the customer acquisition funnel and you have their contact information, email marketing is a way to help guide potential customers to a purchasing decision. Emails can keep your company and your brand at the top of potential customers’ minds to help persuade them to consider purchasing your product.
Events are a way to introduce people to your business for the first time. Connecting with prospects during networking or collecting emails upon event registration can lead to other customer acquisition strategies, such as email marketing. Whether hosting or sponsoring an event, or hosting an information booth at a trade show, events are a way to help expose your business to new potential customers.
Search Marketing & Paid Advertisements
In a digital-focused world, search marketing and paid advertisements may be tools for entrepreneurs to use to promote their startup. Search Engine Optimization (SEO) can provide a way for your website to be searched more often and could lead to more people becoming aware of your product. Paid advertisements can help you reach your target audience and get potentials into the customer acquisition funnel.
Measuring Customer Acquisition
A way to measure customer acquisition is the Customer Acquisition Cost (CAC). This breaks down to the amount of money spent to acquire one new customer. CAC assigns a value to the customer acquisition efforts and can help calculate a business’s Return on Investment (ROI). To calculate the Customer Acquisition Cost, assign a time frame to the calculation, and divide the money spent on sales and marketing during that period by the number of new customers acquired during that period. For example, in one month you spend $10,000 on sales and marketing and acquire 80 customers. Your Customer Acquisition Cost for that month is $125. The assumption made from this calculation is that every $125 you spend on sales and marketing, you potentially acquire 1 new customer.
The Importance of Customer Retention
One common myth of customer acquisition is that if you build it, they will come. This phrase would be more truthful if it read “if you build it, people may come into contact with your business and could potentially choose to make a purchasing decision.” Customer acquisition strategies help increase the opportunities for a potential customer to become an actual customer, but they do not assume that every person in the consideration phase will make a purchasing decision. The customer acquisition journey is theoretically complete when a purchasing decision is made and potential opportunities become a customer. But now what?
While acquiring new customers is productive for some businesses, customer retention and turning customers into repeat customers is also important. The Pareto Principle for Customer Success is often called the 80:20 rule – 20% of your customers will generate 80% of your sales. Once customers have been acquired, the goal for many businesses is to uphold product satisfaction, customer service, and transform one-time customers into repeat customers.
The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.