My Customer Acquisition Costs are too High! What can I do to Lower CAC?

Whether you are a B2B or B2C business, you need customers to make your business profitable. B2B and B2C businesses may acquire and nurture differently, however, both have Customer Acquisition Costs (CAC). What is CAC? CAC is the cost of acquiring a new customer. Costs related to CAC include resources, overhead, salary, and time.

Here is an easy formula. The Customer Acquisition Cost equals the cost of marketing and sales divided by the number of new customers. For example, if a construction business spends $10,000 on marketing and $90,000 for a full-time salesperson in one year, that is $100,000 of marketing and sales. If the business brings in 50 new customers, the CAC is $2,000. If the average sale is $12,000, the business is profitable, but if the average sales are $2,500, then the CAC is way too high. The business needs to either lower the CAC itself or increase the number of new customers.

This begs the question how can a business lower its Customer Acquisition Cost and still be profitable? We would like to consider this question and provide four strategies that you can implement now to start lowering your CAC. The following strategies are based on a business using a CRM to manage and nurture their leads and customers.

Analyze the customers that buy from you repeatedly

When you use your CRM to track customer activity, you are collecting invaluable data. You can use this data to run reports or create real-time CRM dashboards on customer behavior patterns. You can look for common denominators such as:

  • Time of day or week that they buy
  • Which products and services are bundled the most in a purchase
  • Their demographic – age, gender, income status, location

Analyzing your repeat customers will help you nurture other customers and attract like-minded prospects, and this will be the start of lowering your CAC.

Optimize your marketing to target prospects with the same behavioral patterns as your repeat customers

After you analyze your repeat customers, you can incorporate what you learn into your marketing and sales tactics. Your marketing should be clear, so your target audience knows what you offer and how it will help them. By using your analyzed data from your CRM, you can create messages that address their pain points (creating a bond) and how you can improve their life. It doesn’t matter if you are a beauty salon or a construction company, customers want to know that your product or service will improve their daily life. Whether it is healthy living and feeling beautiful or feeling safe within an architectural structure, it is all the same. They will become repeat customers when they know they can trust you. Building trust begins with your messaging and helps decrease your CAC.

Utilize automation to nurture customers

As a business owner, you want to grow your customer base, but you also want to retain the customers that you have. As you are acquiring new customers, your CAC is going down. However, if you are losing customers to a competitor, your CAC is increasing. To prevent the loss of customers, you need to nurture and, at the same, do it in a way that does not lead to Follow Up Fatigue.

You can use your CRM’s automation features to nurture existing customers and convert them to repeat customers. Here are three common strategies to nurture through automation:

  1. Segment your audience and deliver content that is relevant to them based on variables that you set in your segmentation.
  2. Promote and bundle products or services that are often bought together.
  3. Send reminders, personal notes (birthdays, etc.), or product/service-related information

Automation helps you stay in front of your customers and keeps you top of mind. When you are top of mind, they are more likely to remain as a customer and buy again, therefore, reducing your CAC.

Learn from your customers directly

Businesses who make assumptions about their customers without informed data are often wrong, and the wrong assumption hurts the business and increases Customer Acquisition Costs. Businesses that learn from their customers help the business grow in quality and quantity while decreasing CAC. You can learn from your customers directly by sending out surveys and feedback emails through your CRM. This data along with the data collected from your behavioral pattern analysis will help you understand your customer and provide better customer service.

Conclusion

Lowering Customer Acquisition Costs is important part of making your business profitable. A CRM can be a valuable tool to help you analyze CAC and implement strategic tactics to attract and retain customers. If you are considering a CRM or thinking of switching to a new CRM, call us at 301-332-0613 to schedule a demo of X2CRM. Let’s start lowering your Customer Acquisition Cost and increase your profit.

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