For any business, it’s a familiar situation. You want more customers—but it can be expensive to acquire them, and if they end up churning, that’s just money lost.
But while these costs can be problematic, there are ways to keep them under control. And as consumers’ expectations shift, and it becomes increasingly important for businesses to market themselves effectively, it’s clear that managing these costs should be a top priority.
Let’s explore some of the common reasons for high customer acquisition costs (CAC)—and techniques you can implement to reduce them.
First: What goes into your customer acquisition costs?
As much as CAC may seem self-explanatory, there’s a little more to it than you might think. While, yes, it does cover all the essentials like advertising, marketing, and even employee costs involved in bringing in new customers, for businesses like ISPs and smart home brands, it also considers costs like:
- Device acquisition and/or production
- Inventory management
- Installation costs
In some cases, it can even consider things like early-life support costs, especially in situations where a customer would churn without it.
3 ways to reduce customer acquisition costs
Minimize the amount you spend setting up new clientele.
ISPs and smart home brands both operate within highly technical fields, which means it can be difficult for consumers to set up on their own. This often pushes the burden back onto the business to make sure customers are set up properly, which gets expensive—but there are ways to manage the costs.
For example, ISPs often need to spend on managed devices that can maintain some sort of control over the experience subscribers have. They also often need to spend on technician visits (and the infamous turnaround visit) to install or troubleshoot those devices in the first place, before a subscriber ever uses their service.
Both these areas of spend are great places to consider reducing costs, whether by reducing reliance on managed devices and introducing other techniques for managing WiFi experiences or by improving installation processes so teams don’t need to send technicians more than once.
For a smart home brand, on the other hand, it’s not always quite so cut and dry to identify where you can cut costs in the initial phases. Many customers will end up calling your support team for help after receiving their new device to get it set up (or return it if they think it’s not working); so look for ways you can educate them on how to do it properly on the first try without your support team’s involvement.
Make customer retention a priority.
Little-known fact: Your customer lifetime value can impact your customer acquisition costs! How? Well, think about it this way.
If a customer buys once from you, you’ve made a sale. That includes all the requisite acquisition costs; the ads you made to attract them, the time your sales and marketing teams spent converting them, the initial setup and experience management costs. Your customer is set up, and they’re happy with their new product or service.
Now, you have a choice. You can either spend those fees again to bring in another new customer—or you can get a repeat purchase or service extension from your existing customer.
While it’s always good to encourage the former, the latter is the real value for a business because it means you’re getting your profit margin without the spend. So by prioritizing customer retention and encouraging repeat business, you can maintain and build your bottom line while simultaneously reducing your expenses.
Enlist customers to be brand advocates.
Your customers have something incredibly valuable to offer in terms of attracting other new customers to your business: Their referrals.
When customers are satisfied both with your product and your service, they’re likely to want to share their experience with others, often in the form of verbal recommendations or online reviews.
As a business, do what you can to encourage these word-of-mouth marketing efforts. According to Dimensional Research, nearly 90% of consumers are influenced by these reviews when making their own buying experiences. So if they’re seeing great things about your business, naturally, they’ll want to work with you, too.
And that kind of advertising doesn’t cost you a thing.