5 Effective Ways for Startups to Lower Customer Acquisition Costs

Customer acquisition is the key to any company’s success. It can be difficult to find new customers, but there are many ways that startups can lower customer acquisition costs and increase their chances of success.

The customer acquisition cost by industry 2020 is a study that was conducted by the Aberdeen Group. They found that customer acquisition costs are projected to rise from $2.5 billion in 2015 to $7.6 billion in 2020.

It’s one thing to have a great product and demand for it. It’s another thing entirely to be able to monetize consumers and acquire them at a low enough cost.

It’s not enough to have product/market fit in your company. Standing out from the crowd, especially in the early phases of expansion, necessitates lowering the cost of gaining new consumers. Customer acquisition drives sales and profit margins, and it must be evaluated and balanced against the lifetime value of customers (LTV).

This article discusses how companies may avoid excessive client acquisition expenses, which is one of the most common startup killers (CAC). We’ll go through five important methods for reducing CAC. None of them require a large initial investment. They were selected for their cost-effectiveness as well as their potential to generate long-term development. Each strategy’s explanation contains examples from Supermetrics’ own business processes, ensuring that each method can be implemented.

The following methods will be discussed:

  • Retargeting and remarketing are two terms that are used interchangeably.
  • Programs with partners
  • A/B testing is the process of comparing two options.
  • Customer retention is important.
  • Processes that are automated

Retargeting and remarketing are two types of retargeting.

The two methods may be distinguished, with retargeting referring to cookie-based ad targeting and remarketing referring to the collection of information from users and visitors in order to send them promotional mailings.

What is retargeting and how do you utilize it?

Retargeting clearly encompasses a lot more than just retargeting visitors who abandoned their shopping cart on your company’s website.

You might, for example, target website users who spent more than one minute on the page or those who went to your price page. The advantage of retargeting is that those prospects are already interested in what you’re selling. Most SaaS businesses, for example, give free trials, which are excellent for remarketing. We provide 14-day free trials with full access to Supermetrics, and individuals who sign up for the trial but don’t convert are ideal remarketing prospects.

You can be extremely precise with retargeting.

You may also narrow down your trial users to those who are most likely to convert. You can do this by gathering more specific user data, such as what product features they used and how often they used them, whether they opened or clicked on any links in newsletters or emails sent to them, their geographic location and company size, whether they visited your resources or pricing page, and so on.

Running queries, in the case of our Supermetrics solution, are used to draw data into your reporting systems. You must select your data source and date range, as well as the metrics and dimensions you wish to include, for these searches.

Supermetrics Query example

Supermetrics for Google Sheets is the source of this image.

Users may make mistakes while constructing queries, such as neglecting to verify their data source, resulting in failed inquiries. While this may happen to expert users as well, it tends to happen more often when the user is unfamiliar with the product. This is why the query success rate may be calculated and used to forecast a user’s purchasing potential. Users who have performed 0 successful inquiries throughout their trial period are clearly less likely to become clients.

We can build an automated algorithm on a customer data platform that determines the purchase forecast for each trial user based on their user behavior and the information they supplied when signing up by taking into consideration all of the available user data. Finally, we may build ad campaigns that specifically target trial users who did not convert but whose purchase prediction score indicates that they are likely to buy the product later.

Retargeting in this manner is very cost-effective. Because you’re just targeting the bottom of the funnel, when your prospects are only one step away from becoming your customers, hyper-focused campaigns are the greatest method to keep track of your ad expenditure and prevent overpaying.

Is remarketing a viable option?

The aim of remarketing, on the other hand, is to gather emails from visitors and users in order to develop email campaigns that are specifically targeted to them. Giving your email address entails more than a simple link click. It implies that the value consumers get in return must be more than, say, the value they would receive from a normal blog post.

You may use the remarketing approach to target webinar attendees, ebook downloaders, and podcast subscribers, for example, in addition to trial users. Alternatively, if you have a resource center where visitors can access your ultimate guides or other helpful materials that go beyond your usual blog content, you may establish gated content on your website.


Supermetrics Facebook Ads Masterclass is the source of this image.

2. Affiliate program

It’s exactly what it sounds like: a partner program. It’s where you reach out to influencers, brands, and other businesses to cooperate and generate attention and eventually revenue to your company.

As an in-house Affiliate Marketing Manager, I work with the affiliate marketing team at Supermetrics to manage the affiliate partner program. Since its inception at the beginning of 2018, our affiliate program has been an important component of our marketing strategy.

We have thousands of affiliates that earn over $6,000 in monthly income. This also led to our ARR increasing from €10 million to €20 million in only a year (now approximately €28 million). Our marketing approach revolves on large-scale partnerships, which has aided us in our journey from startup to scaleup.

And, as long as the relationship is mutually beneficial, virtually no partnership is too tiny. While we’ve worked with huge names like Google and HubSpot, as well as virtually every martech with whom we’ve launched a connector, the majority of our affiliate relationships are with smaller firms.

Advantages of a Partner Program 

The benefit of having an associate partner program is that you only pay them when they generate real sales. For each conversion, you give them a commission, which is typically about 20% of the transaction price. It is up to them to determine how they will market your goods, whether via social media, word-of-mouth, pay-per-click (PPC), blog posts, email, newsletters, or any other means they see appropriate. Many of them will just refer your goods to their own customers.

All you have to do now is pick an affiliate marketing platform where you can manage your affiliate base and handle all transactions. Alternatively, you may join an affiliate network that would handle it for you and take a cut of your sales as a commission. The transactions are tracked automatically using cookies, and each affiliate partner is given a unique referral link.

So, what is it about affiliate programs that makes them so appealing to startups? Because you only pay for sales after they happen, there are no large upfront investments required. There will be no money spent on marketing efforts that do not bring in consumers. The primary aim is to increase growth rather than decrease CAC. It is, nevertheless, of particular importance to businesses that are just getting started and wish to attract fresh investors. Affiliate sales will increase their yearly growth rate and profit margins.

In a nutshell, affiliate partners assist your company in reaching new segments that it would not likely reach on its own. Affiliates can help to increase brand recognition by spreading the word. They increase your social proof by expanding your reach and producing useful material in the form of guides, tutorials, reviews, and comparisons. 

3. Split-testing

A/B testing is a common CRO technique that involves comparing various aspects of your campaigns or content to see which yields the greatest results. This applies mostly to conversions, but also to leads and client retention. Only your time and perseverance are required to optimize the leads for a lower CAC.

Split testing refers to comparing two completely different variants, while A/B testing refers to testing a single element on a website or in a campaign on a smaller scale. However, the two terms are often used interchangeably.

Landing page optimization is perhaps the most frequent use of A/B testing. You can divide your web traffic such that half of your visitors arrive on version A of your website and the other half on version B of your page. CTAs, offers, layout, text, headlines, pictures, and videos are some of the components you may want to test on a landing page.

A/B testing alternatives

While there are numerous commercial solutions for conducting A/B testing, using Optimize for Google to build your experiment is the simplest method to get started.

Google Optimize

Google Optimize

Google Optimize is the source of this image.

Variants are the precise modifications to your landing page that you wish to test. You may make a lot of variations and compare them to your original landing page. Create an experiment goal and add your targeting criteria, such as whether you want to target visitors based on their activity, geography, device, or UTM data.

Google Optimize Parameters

Google Optimize is the source of this image.

It’s a good idea to conduct your experiment for at least two weeks in most instances. 

Platforms for content management systems

You may also conduct your experiment on your CMS platform by experimenting with various components on your landing page. For example, here’s a CTA we use to recruit new affiliate partners on our affiliate marketing-related blog articles on the Supermetrics website:

Supermetrics Affiliate Program

Supermetrics CTA is the source of this image.

On WordPress, we modify the content and picture in the CTA, as well as its location on the page. We can draw some early findings about the best-converting variation of the CTA block after tracking clicks and conversions on Google Analytics for a period of time.

Supermetrics Google Analytics

Google Analytics is the image source.

Email marketing campaigns

A/B testing is very easy to do with email campaigns. Experiment with various subject lines to discover which one has the best open rate and click-through rate.

We’re utilizing Exponea, a customer data and experience platform, to generate variations of the same email campaign and equally distribute the chosen recipients among the variants before delivering the winning version to the remaining consumers.

Paid ads

Paid ad campaigns, which need continuous testing and optimization, are another popular use case for A/B testing. To improve your PPC (Pay Per Click) strategy and maintain your expenses as low as possible, you must test your campaigns, advertisements and ad groups, keywords, and landing pages on a regular basis. Simply changing the ad text or graphics may have a significant effect on your conversion rate.

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4. Retention of customers

Everyone understands that keeping existing consumers is less expensive than gaining new ones. As a result, your client retention strategies may help you lower your CAC.

At Supermetrics, we have a distinct customer success team that works alongside our sales and support teams and is in charge of maintaining client connections. Demo calls, onboarding, case studies and business evaluations, upselling, renewals, and customized assistance for the most important customers are all covered by the success function.

Customer communication that is personalized clearly consumes a lot of resources. The more customers there are, the more essential it is to segment them properly. As a result, client success is typically limited to the top tier. For the next tiers, you’ll need a product-driven self-serve funnel that converts leads and then helps them with automatic onboarding, updates, and helpful resources once they’ve converted.

Automated onboarding may include, for example, access to a template gallery, depending on your specialty.

Providing consumers with quick access to onboarding materials like as manuals and walkthroughs is critical for customer retention, especially for a product with a learning curve. Ideally, you’ll turn them into lovers of your product who will naturally spread the word about it. Alternatively, you might use referral or affiliate marketing to get them to become brand ambassadors.

5. Processes that are automated

Automated procedures have previously been discussed in terms of client retention, such as onboarding, and customer acquisition. However, there are many indirect methods to decrease the cost of gaining new consumers via automation.

Data-driven companies are all the rage these days. But what it really implies is that all decisions should be based on evidence that is readily accessible. Because such data is often dispersed across many platforms, there is a significant need for solutions like Supermetrics that can automatically bring it together. We’ve also made significant progress in developing our own attribution model, which quantifies each channel and campaign’s impact to our total marketing efforts.

Because most conversion paths include more than one channel or campaign, most companies are dealing with multi-touch attribution, in which the customer journey spans several touchpoints. Measuring the effect of each touchpoint is difficult and time-consuming, requiring a lot of trial and error with various models and relative weights. However, the findings will give you with useful information that can help you increase income and reduce expenses, including CAC.

As an example, consider automated processes.

Here’s an example of an automated procedure we’ve implemented for our affiliate partners that has an indirect effect on client acquisition costs:

Affiliate activation sequence Supermetrics

Exponea’s Supermetrics project is the source of this image.

This activation sequence delivers automatic emails to affiliate partners who haven’t delivered us any clients at certain intervals. The first email arrives two weeks after they register, the second arrives one month later, and the third arrives three months later. These emails include helpful hints and connections to valuable resources, as well as a reminder to promote our goods.

Most consumer data systems enable for the creation of such sequences, which is very easy. All you have to do is integrate customer and affiliate data and create a scenario that specifies the criteria for sending each activation email. The affiliate registration date and the quantity of referral sales were the criteria in this instance.

The aim of automating these sequences and procedures is simple: to save time and money, for example, by gaining more consumers at a cheaper cost. However, automation for the sake of automation does not lead to growth.

As a small company, you must carefully choose your software and concentrate solely on channels that provide quantifiable results. Using automation at least for client acquisition, retention, onboarding, and analytics is a fundamental need these days to remain competitive, whether you’re creating a completely automated funnel, a sales-assisted funnel, or even a self-serve funnel. 

Finally, some ideas

These are long-term growth tactics that are particularly important for SaaS businesses. When compared to the rule of 40, reducing CAC helps SaaS companies improve their growth rate and profit margin, which may attract new investors.

Because acquiring customers is the most time- and resource-intensive aspect of operating a company, finding methods to cut down on it is definitely beneficial. It is feasible to begin the transition from startup to scaleup using the methods mentioned below.

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Frequently Asked Questions

How does ecommerce reduce customer acquisition cost?

When you sell your products online, you are able to reduce customer acquisition cost. This is because the internet allows for people all over the world to find your product and buy it.

How can customer acquisition be improved?

Customer acquisition can be improved by a number of things, including working with influencers and other social media platforms to get the word out about your product.

How do startups create a customer acquisition plan?

A customer acquisition plan is a strategy for how a company will acquire new customers. It usually includes the marketing channels that are being used to reach out to potential customers, as well as the pricing of the product or service.

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