Getting more customers is always a major goal for any startup business. After all, this is the road to faster growth. But these customers always costs significantly to attract. So much so that it can take a considerable amount. of your starting funds.
As such, you might be wondering if you can reduce those costs. Luckily, you can. And there are a lot of ways you can do that. Let’s look at these ways and learn how to do them with Virtua Solutions’ help.
Why Your Startup Business Needs To Reduce Acquisition Cost
Okay, so acquisition cost is very much a part of running a startup business. So, you might be curious as to why the effort to bring it down from the start. The reasons may be obvious but they are still worth understanding to plan your cost reduction strategies accordingly.
It Increases Revenue
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The foremost reason to reduce customer acquisition costs is that it lets you earn more. Lower costs means that you get a higher net revenue from each customer. Furthermore, lower acquisition costs helps attract more customers. That boosts your revenues more.
It Helps You Optimize Your Operations
Concurrent with the above, lowering your acquisition cost also helps optimize your overall business strategy. A lower acquisition cost means you can use your business resources more economically. You can then redivert the savings from here to boost your retention efforts.
Calculating Your Customer Acquisition Cost
The first step in any acquisition cost reduction effort is getting the figures right. Calculating the correct cost will help you set the benchmark for your operations. The formula used here is as follows.
Customer Acquisition cost=(Total cost of sales and marketing)/Total number of customers attracted.
Note that you should be careful when getting the total cost of sales and marketing. Here, you need to consider which costs directly tie to customer acquisition and which ones are just incidental to it. That will give you a more accurate value.
Note that acquisition costs vary across industries. Similar businesses might also have different figures depending on the type of customers they are reaching out to. When setting your target acquisition cost, consider the current market value.
You should also account for what is known as cost per acquisition (CPA). This one is a different metric used at the campaign level. It pertains to the cost needed to acquire a lead. Keep in mind that a lead is different from an actual paying customer.
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Comparing the two metrics will help you see how successful your marketing efforts are in generating conversions. The closer the two figures are, the higher your conversion rate is. That means that you can turn most of your leads into actual customers.
Strategies Your Startup Business Can Use To Lower Acquisition Cost
Once you have determined the acquisition cost, it is time to explore how to lower it. Here, we list some of the strategies that you can use. Note that the actual ones you will use depends on the nature of your startup business. Thus, you want to assess it before choosing the ones to implement.
Focusing On The Appropriate Audience
This one might seem obvious but companies can sometimes forget about it in the rush to attract more customers. Often, you end up casting too wide a net to capture them. Avoid that by having a clear idea of the kind of customers you want to get.
Image from Neil Patel.
Here, it isn’t just about the demographics. You also look into how people will be using your products. That helps you devise a more personalized acquisition strategy that better convince your target.
Studies show that 83% of customers are more willing to give more information about themselves in exchange for that personalized experience. By guaranteeing them that you are ready to deliver that experience, you get the needed information easier. That also means you lessen the cost of acquiring the info.
Take Advantage Of The Pareto Principle
Once you have your target audience, you might wonder how you would approach them now. A useful tool here is the Pareto principle. It simply states that you should focus on the top 20% of customers that give you 80% of your overall sales. With that, you can get most of your revenue at the cost of just a small number of customers.
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Of course, the challenge is knowing who these top 20% are. For that, review your customer data to see how people spend on your products. From there, you can predict which customers will purchase what products.
The strategy is also a great way to trim your current product base. Trying to market products that draw in only a few customers is not cost-effective. By delisting these products, you can put the resources into the ones that generate the most income.
Retarget Customers
When you go after potential customers, it might not always lead to a successful conversion. However, just letting them go wastes the resources you already spent getting them in the first place. That becomes a contributor to your acquisition costs.
Image from Neil Patel.
Retargeting these customers is a great way to recover these costs and ensure they still lead to conversions. Virtua Solutions can help you in this effort. Our customer service team will handle the retargeting effort, reaching qualified leads again. With us doing the work in the background, your sales team can focus on engaging and bringing in more new customers.
Have A Clear Path Toward Conversions
Often, the one thing that prevents a lead from becoming a customer is that they don’t know how to get there. Here, you need to consider all the offers that you provide. These offers should align with customers’ current needs in the stage of the sales funnel they are in. That gives them a clear impetus in the direction to take.
Image from Meticulosity.
You would also want to optimize the sales funnel itself. One aspect you should look into is the reasons why customers drop at certain parts of your funnel. Look into your analytics data to see the most common ones. From there, we can help you develop and implement the necessary strategies to improve these points and reduce drop rates.
Helping Your Startup Business Get Customers More Smartly
Virtua Solutions is ready to lend you a hand in improving your acquisition strategies and lowering costs. And with great pricing too, so that you know you are still within your desired acquisition budget. Contact us today and let’s help your startup business start attracting more customers into your fold.