While customers are the lifeblood of any business, no two look or act exactly the same. Nor are all acquisition channels equally effective at bringing them to your door. Recognizing the most effective channels for customer acquisition is a major challenge for businesses of all sizes, yet it is a critical component in the overall marketing strategy if the company intends to build a solid and stable customer base.
In developing an understanding of the various customer acquisition channels and their comparative value, businesses must consider three key questions:
- What is an average customer worth to your business?
- Which channels will most effectively attract customers?
- What is the cost to use each channels effectively – and at what volume?
Answers to these questions should form the basis of an effective customer acquisition strategy.
Finding the Right Channels
There are numerous channels to choose from in the digital and traditional platforms, and the investment necessary to put them into play can vary widely. The use of some channels will result in a higher cost per acquisition when it comes to the customer lifetime value they create, while other will generate a lower cost. Some are more sophisticated than others and require some level of expertise to implement.
Some of the more common channels include:
- Search Engine Advertising: Search advertisements are targeted to match specific keyword searches, or search terms used by consumers. Businesses are able to present consumers with advertisements tailored to their immediate buying interests. The search ads are prominently placed above and to the side of the unpaid search results.
- Search Engine Optimization (SEO): Through SEO, a website or webpage is optimized using various techniques to appear higher in organic (unpaid) search results. The higher the ranking and the more frequent the site appears in search engine result pages, the more search engine users will visit.
- Social Media Advertising: Both Facebook and Twitter offer ways for advertisers to prospect for customers with sponsored ads and Tweets.
- Content Marketing. A business creates and distributes relevant and valuable content to engage specific target audiences with the objective of driving profitable customer action.
- Direct Sales: People with these responsibilities may do inside sales, such as telemarketing, or they may manage specific regional territories or individual assignments, like trade show attendance.
- Affiliate Marketing/Referral Marketing: With affiliate marketing, a business rewards affiliates for each visitor or customer they bring to the company or each sale from one of those visitors. Affiliate marketing is strictly financially motivated. Referral marketing incorporates the same idea, but it relies on trust and personal relationships to drive sales.
It is not necessary, and may in fact be counterproductive, to test a great number of channels simultaneously. It takes time to put many of these strategies into play. For content marketing, for example, it can take months to create a meaningful quantity of effective material. SEO requires testing of page combinations, link building and the optimization of each page’s content. Many successful businesses have packed their customer acquisition pipelines using only a very limited number of channels. Facebook, for example, counted on viral growth until its population grew into the millions, and then it pursued SEO.
Optimize Channels with A/B Testing
Once channels with potential have been identified, they need to be tested. How well do they drive traffic to your business? How much of that traffic converts into paying business – or at least a conversation?
A good way to optimize the channel for conversions is to carry out A/B split testing. This is used in advertising using random experiments with two variants – A and B. One is the control and the other is adjusted, in terms of everything from creative to colors to keywords, and measured for performance against the control.
If it is found that Facebook ads are performing better than other channels, A/B testing can be used to help improve click through rates and conversions. It typically takes ten A/B tests to realize a definite change in performance, and the changes may well be diminutive. However, this testing is affordable and is worth the investment in opening up the new customer pipeline.
The Issue of Scale
Ultimately, businesses want to be able to reach their markets in a scalable way, where the long-term value of the customer outweighs acquisition costs by about 40%. Not all channels scale equally well, which is an issue to keep in mind when launching marketing campaigns.
With search ads, for example, there are a finite number of clicks to buy. Even when they are abundant, there is a point where ads become decreasingly effective due to being shown on less targeted keyword searches. In sales, the cost to employ a sales team must not be greater than the total customer lifetime value of the sales they will bring in.
As with anything in business today, the development of customer acquisition channels is a process. The challenge is identifying the right channels, those where performance can be tweaked and tested and those that provide an advantage in scale. Once addressed, other concerns can take priority, such as competitiveness, conversions, and improving the bottom line.