đź’° How to Lower Your Customer Acquisition Costs...

Renier Kriel

5 practical strategies to reduce CAC for startups: Analyze channel performance, engage communities, leverage referrals, diversify offerings for upselling, and form strategic partnerships for efficient customer acquisition.

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OK, so you got some adoption, your usage is growing and you’re making some sales. Now, why aren’t you making any real profit yet?

Get down

Good business comes down to one thing: The money you get in (Customer LifeTime Value or LTV, i.e. revenue) minus what it costs you to get that customer (Customer Acquisition Cost or CAC) equals profitability (considering your customer servicing cost is under control, but more on that in a future edition).

Servicing costs aside, there are basically 2 ways to make more money from each customer :

  1. Raise the LTV — This can be done through partnerships, reducing churn or upselling.
  2. Lower your CAC — Acquire those customers for less.

The first one only works up to a point, I mean you can’t keep raising prices without taking pain. So, like most of us, you’ll want to focus on number 2.

5 Strategies for lowering your CAC

1. Know your numbers

The first step is to actually know what your current CAC is per channel. Build yourself an “Omega” dashboard that combines all your analytics with your weekly/monthly sales. Then looking at these costs, try different strategies in different channels while still measuring your CAC per channel.

Once you have your lowest CAC channels, A–B test and double down. Boom.

2. Build a hyper-engaged audience/community

Create a standalone, associated audience-based product (ask Elvorne to help you) – a newsletter, community, blog, tool etc. – with marketability, so you can develop high value and engagement on it.

Test acquisition costs into that product instead – it should be cheaper because it’s a more neutral, value-driven space. Build your funnel to go from audience to your main product, optimise the conversion and double down on acquiring users via that route instead.

3. Build a solid referral mechanism

Word of mouth is great (because it’s practically free!), and its digital cousin is getting current customers to refer their friends and family. If your Net Promoter Score is pretty decent, take it a step further and build a referral mechanism with a strong internal campaign – reward people with value for referring others.

4. Diversify and upsell

You don’t want to raise your prices to the point where you’re not competitive. But that doesn’t mean you can’t increase your LTV in other ways.

Remember, you only pay CAC once. Once they’re in your database, you can reach them cheaply. So why not create new products/services and upsell them?

5. Partnerships & collabs

Is another non-competing company talking to your market? Maybe there’s a chance for synergy or some other reason to collaborate. Striking a deal where you share or cross-promote products is one way to access more of the right people at a lower cost.

Got a CAC insight to share? Hit reply and let us know…

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