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That’s why small businesses need to understand how to acquire customers in an efficient, effective manner. And the very first step is to begin measuring acquisition. Unfortunately, only about five in ten companies track their customer acquisition, and fewer than that monitor lifetime value. To achieve growth and transition from a startup to a sustainable small business takes an understanding of customer relationship management, sales, marketing, and customer service.

So what does this mean for small business owners?

Figuring out how to find customers is a top priority for any growing small business, and this process is known as customer acquisition. Many small business owners may not have a lot of time or resources to build out a robust customer acquisition strategy, but when they commit to spending the time to research and determine the best strategy for their particular business, they see renewed growth and the potential to expand the company.

A Definition of Customer Acquisition

Current trends show that 76% of customers expect companies to understand their needs and expectations. To keep up with today’s consumers, small businesses need a clear and organized customer acquisition strategy. Customer acquisition simply means the act of earning customers who are willing to purchase your products or services. This generally falls into the hands of the marketing department first, as customer acquisition starts at the top of the funnel. Marketers must show that their company understands its customers’ needs and is ready to meet their expectations. Then, as leads travel through the funnel, sales picks up and continues the conversation. Generally speaking, customer acquisition is a primary goal of marketing and sales, and these departments have metrics to guide them through the process.

That said, metrics are only useful if they’re used. Research shows that customer acquisition rates are only tracked by 58% of marketers, and just over half of marketing teams measure their customer acquisition cost. This means there’s an excellent opportunity for improvement for a lot of companies to better measure, track, and increase customer acquisition efforts and successes.

What Is Customer Acquisition? The Metrics and Terms to Know

What does it really mean to acquire customers, and where do terms like “demand generation” and “lead generation” fit in?

Demand generation means reaching out to an audience of potential customers through different marketing channels to grow their interest or curiosity in your company, brand, products, or services. It’s an important part of both acquisition and retention, as demand generation occurs throughout a customer’s journey from disinterested party to fiercely loyal brand advocate. For example, demand generation for the latest iPhone can target consumers who use smartphones from Apple’s competitors as well as iPhone enthusiasts who are on the fence about upgrading to the newest iteration.

An aspect of demand generation is lead generation, which refers to identifying potential customers who are known to your marketing and sales teams as “leads.” A lead is born when your efforts at demand generation builds or creates enough interest for a consumer to act. If you offer an industry e-book for download on your website in exchange for a visitor’s email address, that email address is a possible lead.

Both of these terms are useful for business owners to know and understand, but they play second fiddle to the concept of developing a customer acquisition strategy. Think of customer acquisition as an umbrella term that encompasses every step you take to identify and convert customers. Your lead generation and demand generation strategies both fall under the customer acquisition umbrella. So are your marketing and sales departments, and sometimes your customer service department.

Examples of Customer Acquisition Tactics

For a concrete idea of what customer acquisition is, think about any marketing or sales tactic you’ve used in the past. Those strategies are for customer acquisition. Some of the most common forms of customer acquisition include:

• Building a website to showcase your products or services
• Creating social media pages for your business
• Putting together a Google Ads campaign
• Attending a local trade show
• Calling leads to set up sales meetings
• Direct mailing
• Asking for referrals

Anything you do to try and get customers is customer acquisition, even cold calling people who have never heard of you. Many small businesses make the mistake of trying lots of different marketing and sales tactics without a clear strategy or without carefully assessing the results of their efforts. Others stick to the same tactics year after year even when response rates dwindle.

Getting more customers through your door (virtual or physical) isn’t about trying every customer acquisition strategy under the sun. It’s about improving your customer acquisition process. That starts by developing a clear and organized customer acquisition strategy.

How to Create Your Customer Acquisition Strategy

Fortune 500 companies have the budget to create complex, multi-pronged customer acquisition strategies that seamlessly integrate their sales, marketing, and customer service teams.

Step 1: Identify Your Customers

Who are your customers? This may be an easy question to answer, but have you written it down or challenged your assumptions? Start your customer acquisition strategy by creating detailed profiles or personas of your ideal customers.

Consider data points that include:

• Gender
• Age
• Location
• Income
• Hobbies
• Values
• Life stage
• Habits

If you’re a B2B company, you can do the same thing for businesses by focusing on their industries, needs, size, budgets, and more. During this process, you will likely identify multiple customer profiles. That’s great: It allows you to segment different profiles so you can customize your acquisition strategy for each different type of profile, or personas.

(Learn more about identifying and creating personas: “Personas: The Art and Science of Understanding the Person Behind the Visit.”)

For example, a local home remodeling company may be used to working with baby boomers who live in their “forever home” and want to make it perfect. However, after looking at its most recent clients and reviewing its previous bids, the company realizes that it’s getting a lot of interest from dual-income millennial couples who are interested in upgrading their home.

Step 2: Understand the Buyer Journey

Now it’s time to research and design a buyer’s journey in order to reach your targets. This is where your marketing and sales teams can really shine. Figure out how to most effectively communicate with your target audience and move them through the different stages of the buyer’s journey, namely:

• Awareness
• Consideration
• Decision

Again, there are a lot of marketing tactics that can work. Test different methods and make sure you have metrics to assess their success. (Learn more about the sales funnel and the customer journey in this infographic: “Understanding the Buyer’s Journey Through the Sales Cycle.”)

Step 3: Nurture Your Leads

When you bring in warm leads — those who have transitioned from marketing qualified leads (MQL) to sales qualified leads (SQL) — it’s time for your sales team to get to work. Nurturing leads means building an authentic, personalized relationship with those customers who are most likely to convert, and this starts with marketing, then continues in sales. This step could include any number of tactics, from a sales call and presentation to a personalized coupon based on an individual’s browsing history on your website.

(Learn more about lead nurturing with this article: “What Is Lead Nurturing?”)

Step 4: Assess, Assess, Assess

It is crucial to know where your customers come from so you can tell which marketing and sales tactics are working, and how well. This will allow you to put your money and resources where you can get the most bang for your buck.

It is easier than ever, for example, to assess online marketing campaigns. You can see how many people clicked on your Facebook ad, downloaded your e-book, or watched your YouTube video. You can even follow visitors around your website to get a more complete view of their journey and where they are most likely to convert.

To identify which offline campaigns are working, don’t be afraid to survey your customers to find out how they heard of you. Ask when you meet with them. This is a great way to determine your best referral sources.

Why You Need to Establish Your Customer Acquisition Cost

Increasing your customer acquisition can be an important boon to your business — as long as you aren’t spending more money to get customers than they return in profits. In order to make sure you’re coming out ahead, you need to measure your customer acquisition cost, or CAC.

Just like it sounds, the CAC is the amount you invest to bring in new customers to your business. Calculate the CAC by adding up all your marketing and sales costs over a certain period of time or for a specific campaign. These costs can include things like advertising, event fees, printing, client visits, and more. Then divide that result by the number of new customers your business earned in that time period. This will give you your CAC.

The CAC may not be very useful by itself, especially if you don’t know the true value of your customer. At the risk of going into acronym overload, let’s also talk about customer lifetime value (CLV), which is the total amount of profit the average customer provides.

CLV goes beyond a single purchase and calculates an estimation of how much your average customer will spend with you throughout your relationship. For example, a couple who uses your remodeling company to perform a small bathroom renovation may come back in five years and request a full kitchen remodel.

It is nearly impossible to calculate a precise CLV; after all, you can’t know what every customer will purchase or how long they’ll use your services. But by collecting data over time, you can identify trends and use that to forecast an average CLV.

When you have your CLV, you’ll be able to compare your customer acquisition cost to your customer lifetime value to make sure you aren’t overspending to get new customers. You’ll also see which marketing tactics give you the best return for your spend (or ROI, to mention another acronym).

Invest in Customer Acquisition Software

Developing a strong customer acquisition strategy requires skilled organization and depends on tracking and assessing lots of different information and data points. Using spreadsheets for this process is ill-advised. Instead, invest in a robust software solution that can help you through every step in the process.

Today’s customer acquisition software can help you automate a huge chunk of your acquisition campaigns. This software can include multiple programs, including marketing and sales platforms, that are integrated into a centralized CRM solution and gives teams a unified view of leads and customers. With this technology you can segment your audience, design specific buyer journeys, and send out communications customized to a lead’s actions. Not to mention, these platforms can remind you when a customer needs a follow-up call and give you reports and dashboards that make it easy to determine your CAC and CLV.

Small businesses are fully capable of operating a sophisticated customer acquisition strategy that will bring more customers to the door for less money, time, and effort. Move your customer acquisition from “throw everything against the wall and see what sticks” to a smart strategy backed up by data and automation.

Printed with permission from ASBDC. For the original article, click here.