10 Ways to Reduce Customer Acquisition Cost


How much does it cost you to acquire each new customer? The answer to that question is to be found in the equation ‘total sales and marketing expenses/total number of customers acquired. But the result of that equation provides much more than an interesting statistic. Your customer acquisition cost is a measure of the effectiveness of your marketing.

If you don’t monitor your customer acquisition cost, your marketing costs could get out of control, and you will be unable to track the effectiveness of your marketing campaigns. But, if you can reduce the acquisition cost without impacting new sales, your net profit will increase.

Reducing the customer acquisition cost does not mean slashing your marketing budget. Instead, it means increasing the effectiveness of your sales and marketing efforts. So, here are ten ways that you can reduce your customer acquisition cost to improve profits.


1. Narrow Your Target Audience

It’s a bit of a cliche, but you must know who your target audience to maximize the return on investment in marketing. So, develop a profile of your typical customer, including where these people hang out, their interests, and where they will most likely see your advertising. Then, you can focus your marketing spend on campaigns most likely to reach the right people.


2. Increase Organic Acquisition

Advertising will undoubtedly generate leads. But even well-target advertising can be costly. So, divert some of your marketing spend to increasing the sales leads that are generated organically. Increasing your expenditure on search engine optimization (SEO), for example, could increase sales acquired via organic search. Building strategic partnerships with other businesses in your sector could generate free referrals.


3. Quality Over Quantity

The number of leads that a marketing campaign generates is irrelevant. Instead, it would be best to focus on the indicator that matters: conversions. So, direct your marketing budget towards campaigns that yield the highest number of sales rather than those that generate an influx of leads that go nowhere, because every sales lead that does not convert is costing you money, both in terms of the initial marketing spend and the time wasted qualifying out the lead.


4. Implement Customer Relationship Management (CRM) Software

Customer relationship management (CRM) software will help you manage the sales process and guide salespeople through a predefined sales process. And a CRM package will enable you to automate some tasks and so save time. Setting up CRM can seem a bit daunting. But the software can help you reduce the cost of customer acquisition. The software can also improve relationships with existing customers, which will help increase customer retention.


5. Increase Inbound Marketing

Inbound marketing, such as social media, blog posts, eBooks, and Webinars, is a long-term strategy. But it is a strategy that can yield a high return on investment in the long run. And this type of marketing also helps to generate brand awareness and increase trust. So, consider diverting some of your marketing spend to inbound strategies to decrease the total cost of customer acquisition gradually.


6. Encourage Customer Referrals

Encouraging customer referrals will bring you pre-qualified leads already primed by your existing customer’s recommendation. So, people who have been referred to you by customers will be faster and cheaper to convert. Spending time and money on building relationships with customers will increase customer retention and encourage more referrals. You can also encourage referrals by offering incentives, such as discount coupons and special offers.


7. Qualify Leads Hard

It will save you money in the long run if you qualify all your leads hard. So, be sure to ask pertinent qualifying questions early in the sales cycle. For example, you need to know when a customer is likely to come to a buying decision and how much they are willing to spend. And it will help to understand what the motives are that are driving the purchase. Asking these types of questions will enable you to filter out the time-wasters faster, and then you can focus your efforts on the leads most likely to close.


8. Don’t Discard All Dead Leads

Leads that don’t initially convert may buy later. After all, if someone visited your website or requested a quote, something about your offering appealed to them. So, it could help reduce your customer acquisition costs if you do not immediately write off leads that go cold. Instead, retarget them with automated online ads or follow-up mailers. Of course, you may not want to spend excessive amounts of money on following up dead leads. Even so, closing leads that failed to convert the first time around will reduce your overall customer acquisition cost.


9. Consider Alternative Sales Models

Selling direct to customers is not the only sales model that exists. There are other ways to sell products that rely on other people bearing the marketing costs–for example, affiliate marketing, selling via distributors, and multi-level marketing push the marketing spend out to third-party resellers. That means you do not bear the cost of failed marketing campaigns. Instead, you pay a commission, which only becomes due when a sale occurs.


10. Monitor Return on Investment

It is crucial to track the costs of marketing channels and campaigns and calculate customer acquisition costs for each one. Then you can divert funds to the most cost-effective methods and drive down your total acquisition cost. Although this might involve more admin and record-keeping, the savings on marketing will outweigh the additional admin cost



Reducing customer acquisition costs can be a means of reducing total marketing spend. Or it can enable a company to target its marketing expenditure in the most effective marketing campaigns. Either way, the cost of acquiring new customers must be managed just as tightly as you manage the cost of products and overheads.

So, the first thing to do is calculate the total customer acquisition cost and analyze the acquisition cost across the various marketing channels. Then, focus marketing efforts on the most cost-effective marketing methods, channeling more resources into the most productive ones. Ensure that your sales processes, such as lead qualification, are as efficient as possible. Then, you will be able to maximize the benefit of every marketing dollar you spend.


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