Top 5 Ways to Lower Your Customer Acquisition Costs

There is no doubt about it. Developing an effective customer acquisition strategy while maintaining low costs is a difficult task. However, it is absolutely necessary in order to maximize profits and stay competitive. It is also an excellent indicator that your overall marketing strategy is successful; combines low customer acquisition costs and high new customer counts, and you have a great return on investment (ROI). Given its importance, it is time to focus on understanding customer acquisition spending and implementing practical ways to reduce those expenses.

What Is Customer Acquisition Cost?  

Customer acquisition cost (CAC) is the total cost of targeting, attracting, and gaining a new customer. It includes everything from performing consumer research, to developing a marketing campaign, to rolling out advertising. Naturally, it is balanced against the number of new customers to determine the true CAC (CAC = total marketing expenses divided by the number of new customers).


Typically, customer acquisition costs will be weighted against customer lifetime value (CLV) to determine if it is a good CAC. CLV is the total income acquired from the customer over the whole period of your relationship (for as long as the customer remains a customer). A CLV estimate should be based on past consumer data, unless the company is brand new.


Ultimately, companies should aim to have low CAC in comparison to their CLV. A worthy goal is to reach a ratio of 1:3. However, each company may have a different perspective of a reasonable customer acquisition cost, depending on their current situation. For instance, if they are a new company, it makes sense that their CAC will be higher than CLV. Likewise, if the company has not been performing well on CLV, the CAC may be higher. In these cases, the number is compared to past ratios to indicate if it is becoming better over time. 

5 Ways to Reduce Customer Acquisition Spending

customer acquisition cost

At Smart Circle, our knowledgeable team helps companies reach target audiences, acquire new customers, and convert promising leads to delighted customers every day. As experts in the industry, we are pleased to share the top five ways to lower your customer acquisition costs.

1 . Use the Customer Acquisition Funnel as a Guideline

The customer acquisition funnel outlines the phases every individual goes through before making a purchase, or becoming a customer. If a company uses this template to guide its marketing campaigns, it will increase its chances of appealing to a prospect at every stage. There are five steps: awareness, interest, consideration, intent, evaluation, and purchase. A company must consider each phase carefully and develop strategic ways to target and attract the prospective customer in each.

2. Prioritize Prominent Target Customers

Some companies have multiple groups of target customers. Many either try to develop a marketing strategy that appeals to everyone in their audience or create a marketing campaign for each group. In most cases, these solutions are ineffective and expensive. It is best to prioritize the largest, or most promising, groups of customers. Perform careful research on this audience, create tailored marketing, and expect your customer acquisition costs to drop.

3. Focus on Conversions

If you look at the customer acquisition funnel, the first few phases are optimal for lead creation. However, converting leads to customers may be the most challenging aspect of marketing. Attracting customers with catchy packaging, shared values, or outstanding advertising is excellent but how do you hold their attention? Focus on standing out from the competition, providing unique entertainment or value, and informing consumers about your brand and products.


You can accomplish all this in one simple, but effective, way: in-person marketing. It has the power to meet the prospect where they are at, appeal directly to them, and show them exactly what they need to know and see right away. Whereas traditional advertising or contemporary digital marketing may take an unsatisfactory amount of time and effort to reach customers, face-to-face marketing stands out and accomplishes conversions quickly. Effectively, customer acquisition costs will be lower than if you relied solely on these marketing methods.

4. Listen to Customers

Today, companies know that customers value excellent brand experience, strong relationships, and prompt service. It is up to you to show that you listen to your clients, understand their needs, solve problems, and help them achieve their sales goals. While many businesses may view this as a customer retention strategy, it actually helps with customer retention in two ways.


First, it shows your prospects how you intend to treat them if they were to become a customer. Of course, it is challenging to showcase this through traditional marketing methods. Face-to-face marketing displays it plainly and proudly. In an in-person conversation, a sales professional can listen to prospective customers’ concerns or questions and respond kindly. They can also represent the qualities or values your brand wants to reflect, through tone, demeanor, or words. The result? More effective customer acquisition, and ideal customer acquisition spending. Furthermore, if the business continues to live up to the initial image, customer lifetime value becomes higher.


Second, current customers who enjoy your brand will surely pass along the message to their peers. Additionally, they are more likely to leave excellent online reviews which other consumers will use to evaluate your company and products. In turn, you end up using fewer resources to gain new customers.

5. Select The Most Effective Marketing Channels

Modern businesses have many marketing stream options, from television and radio advertising, to newspaper adverts, to digital marketing, to social media campaigns, to in-person marketing. Likewise, within these streams, there are multiple channels available. You may believe the more ways you can advertise, the more chances you have at reaching your target audience. However, it simply leads to higher customer acquisition costs.


Alternatively, perform sufficient consumer research. Find out exactly when your prospective customers are in their shopping prime and how you could best target them at that moment. For many retail shoppers, it could be meeting them in a popular store, showcasing your products, and providing free samples. For business clients, it may be a great opportunity to target them when they are experiencing a problem and you have the solution. For stay-at-home caregivers and workers, door-to-door sales may be a great option. This way, you invest in marketing channels that will work rather than throwing money into many small, undeveloped streams.

What If You Could Optimize Customer Acquisition and Reduce Spending Easily?

You absolutely can, and Smart Circle will help you achieve this! Take advantage of our professional in-person marketing and sales team, our extensive resources, and our nationwide network of professional marketing companies to put your business in front of eager customers. Discuss your goals with us today to get started!