Customer Acquisition Best Practices for 2023
Customer acquisition is a multi-part puzzle, where each piece requires a specific expertise. Many teams struggle because they’re not a master of all of them. This article identifies the five areas of customer acquisition and offers best practices for mastery of each one. Once you know what the pieces are and how to execute on them, you can begin optimizing your company’s customer acquisition program.
Here are the 5 areas of customer acquisition:
- Goal Setting: Setting the right LTV to CAC ratio to target for your business.
- Lead Generation: Investing in thought leadership & other high-ROI channels to capture and convert prospects
- Lead Nurturing: Repurposing content across channels where you already have a line of communication with prospects
- Sales Funnel Optimization: Optimizing conversion across the sales funnel by incorporating multiple touchpoints
- Iteration: Making data-driven strategy refinements based on KPIs
Now let’s examine each area in greater detail.
Best Practice #1: Set the Right LTV To CAC to Target for Your Business
Your LTV to CAC ratio serves as an overall measure of the efficacy of your customer acquisition process. Simply put, it compares the average cost required to gain a new customer against the overall profit made from that customer over the course of their lifetime. It’s easy to understand why a low ratio is problematic: it indicates that your customer acquisition spend is ineffective. A ratio that is too high, however, suggests that potential growth is being sacrificed in favor of short-term profit margin.
An LTV to CAC ratio of 4:1 is an ideal target for most businesses, though this does not take into account many factors such as company size, industry, and company lifecycle stage. For example, newer companies in a high-growth, startup mode will want to set a lower target, accepting a higher burn rate in favor of long-term name recognition and market share. On the other hand, well established companies in slow moving industries (such as Heavy Equipment or Oil & Gas) should set a higher target, spending more cautiously in a slower-growth market.
Establishing this ratio will help you contextualize your CACs in the broader scope of your company’s operations, as well as understand how much you should allocate to your marketing budget. Zooming further in, it also allows you to make more informed decisions as to which customer acquisition channels to invest in based on your current goals. If you need to increase your ratio, you can shift your investment from expensive paid channels such as PPC, to lower CAC channels such as thought leadership. This brings us to our next best practice.
Best Practice #2: Invest in Thought Leadership & Other High-ROI Channels to Capture and Convert Prospects
Businesses have myriad lead generation channels they can choose from, often leading to decision paralysis and simple reliance on past practices. This leads to higher CACs and lower ROI than taking a data-driven approach to customer acquisition, using industry benchmarks to determine which channels will be most effective at capturing and converting prospects long-term.
One of the most effective channels for this is thought leadership—in other words, producing content that is original and truly informative. It has three major benefits for the lead generation stage of customer acquisition:
- It Builds Trust with Your Audience: Because thought leadership content is meant to inform rather than push a sale, it is remarkably effective at drawing in prospects from the top of the sales funnel. Those prospects then begin to view your business as a valuable informational resource, making them more likely to recommend your company to others, while still opening the door for your sales team in the future.
- Lowered costs per lead and CACs: Thought leadership has relatively low costs per lead and CACs compared to other channels. Not only does this help your business hit the LTV to CAC ratio target set above, but it also leads to high long-term ROI.
- Google Preference: Google prioritizes thought leadership content in the search results. This is because it positions your company as an authoritative source of information, and the resulting higher search rankings lead to higher organic traffic, and therefore, new leads and prospects.
An important drawback to remember about these high ROI channels is that they’re counterbalanced by their resource demands and lead times. For example, it takes an average of 9 months of planning and production before reaching thought leadership’s break-even point. The same is true of other high-ROI channels such as podcasts and webinars, with average break-even times of 12 months and 7 months, respectively.
Best Practice #3: Repurpose Content Across Channels Where You Already Have a Line of Communication with Prospects
Content—especially thought leadership—made for a marketing campaign shouldn’t be relegated to the channel it was originally crafted for. Instead, it should be used for lead nurturing in addition to lead generation: this allows you to spread the cost of producing that content across multiple campaigns, as well as reach and convert prospects across the sales funnel.
Repurposing content should adhere to the following guidelines:
- Content should be informative rather than sales oriented: Unless they’re ready to buy, most people don’t like being actively sold to. Unless using the content for an ad or a conversion-oriented landing page, the content you choose to repurpose should be focused on communicating information to your audience.
- Tailor content to each channel: This has two components: (a) channels prioritize content differently, and (b) prospects engage with content differently on each channel. Content must take both into account for successful customer acquisition.
- Include a relevant call to action: Your content should always point to clear, actionable next steps for the reader that is tailored to the platform. For example, most prospects on LinkedIn are less likely to make an immediate purchase, and you’ll see more success long term by offering them a full report in exchange for contact information. This brings them into your lead nurturing ecosystem and creates the potential future sale, when a fully sales-oriented CTA would have lost their interest.
This concept can be expanded beyond nurturing new prospects as well. Channels that reach your existing customer base, such as e-mail and social media, can be utilized to increase LTVs through retention and upselling. When done well, this practice also increases existing customer satisfaction and the likelihood that they’ll refer your products to colleagues.
Best Practice #4: Optimize Conversion Across the Sales Funnel by Incorporating Multiple Touchpoints
Lead generation and lead nurturing, performed properly for at least a year, will produce a steady stream of prospects for your sales team to close. However, there are many potential gaps in the sales funnel prospective customers can fall into, and they need to be actively minimized. To begin our discussion of sales optimization, let’s take a look at the sales funnel prospects traverse.
Each of these 5 stages has a gap in between it for a reason; there are many pitfalls to prepare for. Sales funnel optimization is the art of getting the most value out of your prospects; that is, doing the best job you can do towards closing as many of them as possible. Here are the main tenets of sales funnel optimization:
- Use software to increase efficiency. Your sales team may have a set of best practices for dealing with unresponsive leads for example, but how do you ensure they are trying each one before giving up? That’s where software has a tremendous advantage over a manual system. Tools like Salesforce and Hubspot have built-in functionality for follow-up reminders, recalling topics of personal interest to the prospect, varying email subject lines and content in future outreach attempts, and collaborating with other team members to increase close rates. Of course, dealing with unresponsive leads is only one potential problem software can help you address; it can also assist with identifying low-conversion stages in the sales funnel and tying them to specific salespeople or sales materials; tracking the progress of sales KPIs; and determining the quality of the leads coming into your sales funnel in the first place.
- Create granular customer personas. If your sales organization puts its customers into just a handful of buckets—say, 3 or 4—it can be helpful to get more granular. Perhaps the personas you’re targeting cover only 85% of your target audience, or perhaps they cover all of it, but from too high of a level. By drilling down on everyone who needs what you sell and exactly what problems they face, your sales team will be better prepared to have a thoughtful discussion of the complexities of their pain points and how to solve them.
- Produce personalized sales content. The first way your sales content should be personalized is to each customer persona you’ve developed, highlighting how your product addresses their specific needs and pain points. More granular content is also important: discussing the specifics of each problem that your product solves, without wasting prospect time on selling points that are irrelevant to them. Finally, your content should be personalized to each stage of the sales funnel. Early stage content will focus on the advantages of your product over your competitors, middle stage content will provide more in-depth analysis of the specific ROI that your prospect can expect, while late stage funnel will require the most personalization, even discussing company specific factors such as creative ways to find budget for your product. The form of this content should also be personalized, taking written or video form to best meet the needs of your prospects.
- Provide social proof. Your sales team should be locked and loaded with a list of references and case studies so that at any point in the sales process they can effortlessly say “I have a customer who was in your same boat, and they’re doing a lot better since they came onboard with us.” Giving prospects an opportunity to imagine their situation improving via storytelling or a conversation with a like-minded customer is one of the most powerful tools your sales team can possess.
When you’ve fully optimized your sales funnel, you’ve addressed the final piece of customer acquisition and can turn to the tried-and-true best practice of continued iteration and refinement.
Best Practice #5: Make Data-Driven Strategy Refinements Based On KPIs
Whether for a specific campaign or for your entire customer acquisition process, your team needs to know whether your efforts are successful, and which areas can be improved. Having the right customer acquisition-focused KPIs allows you to develop this understanding. Below are the KPIs we consider most important for evaluating your customer acquisition program:
The Top Customer Acquisition KPIs
|Customer Acquisition Cost (CAC)||Organic: $942
|Average cost of acquiring 1 new customer.|
|Customer Lifetime Value (LTV)||Highly variable, see LTV Benchmarks||Total profit made from an average customer over their lifetime|
|LTV to CAC Ratio||4:1||Ratio of customer value to the expense of acquiring a new customer.|
|Cost Per Lead||Organic: $327
|Average cost of acquiring 1 new lead.|
|Annual Churn||8.5%||Percentage of customers that you lose in a year.|
|Website Visitors||+45% YoY||Total number of visitors to the business’s website.|
|Visitor to Lead Conversion Rate||2.2%||Percentage of website visitors that submit contact information or take another conversion action.|
|Lead to SQL Conversion Rate||14%||Percentage of leads that become SQLs (i.e. move from Marketing to Sales).|
|SQL to Win Rate||27%||Percentage of SQLs that become closed sales.|
|Lead to Win Rate||3.7%||Percentage of leads that become closed sales. Combined percentages of Lead to SQL Conversion Rate and SQL to Win Rate.|
Which of these KPIs is most important differs by industry as well, and you can find a full breakdown here, along with industry specific benchmarks.
Keep in mind that there is always further possible optimization, even in companies with customer acquisition programs that exceed these benchmarks. Continuing to iterate will ensure the steady stream of new customers needed for continued growth.
Improving Your Business’s Customer Acquisition
Understanding these steps and implementing them successfully often requires extensive resources if you plan to do so in-house. Even if you have these resources, the challenges in doing them well is difficult for even those with customer acquisition experience.
A popular option is to employ an external agency to handle the day to day operations of your customer acquisition campaign. Our company has worked in customer acquisition for over 12 years, specializing in creating thought leadership content and organic lead generation for complex B2B companies. If you are interested in discussing a partnership, you can reach out here.