Getting users to sign up to your product boils down to a competition for attention that keeps getting fiercer years after years: 49% of companies define customer acquisition as their primary objective
A user acquisition strategy is vital to get people to use your product without wasting your marketing budget: you need to find who are the persons showing interest in what you do, where they hang out, and how to reach them through convincing arguments. That’s what we are going to see in the following article using June, an analytics tool built on top of Segment.
What Is User Acquisition
Customer acquisition is the process of finding a systematic strategy to turn people into customers.
Why You Need A Customer Acquisition Strategy
A user acquisition strategy makes sure your marketing return-on-investment is positive. In the last six years, the average customer acquisition cost has increased by 60%: marketing is getting more and more expensive, and you don’t want to shoot your precious profits all over the place.
Creating a scalable business model―reaching product-market fit―is another important reason to pay attention to customer acquisition: there is no growth without new and returning customers.
Demonstrating your ability to attract and retain them is what makes a company healthy. Without it, forget about raising funds or getting acquired.
Finding a repeatable process also frees you more time for other tasks while adding stability. If you know what your conversion rates are at every step of your acquisition funnel, you can already predict how much money you need to spend on acquiring new customers to keep your product moving forward.
Remember: a product that doesn’t grow is a dead product. Startup = growth.
How To Measure Customer Acquisition
Customer acquisition isn’t an exact science: it’s a series of experiments. If you’re not measuring what works and what doesn’t, you are doomed to repeat your mistakes.
And for that you can use the metric known as Customer Lifetime Value to Customer Acquisition Cost ratio (CLV:CAC).
CAC stands for Customer Acquisition Cost and is calculated by dividing your marketing costs (MC) for a given campaign in whatever currency you use by the number of customers acquired (CA) during this campaign.
The average lifetime value of your customers (CLV) describes how much revenue they can bring you over the next few years if they don’t churn. It’s a bit more complex to calculate so bear with us for a minute.
Stripe―the payment processor―obtains the CLV by dividing your Average Revenue Per Subscription by your Subscription Churn Rate.
- The average revenue per subscription is the division of your monthly recurring revenue by your number of active subscriptions.
- Your churn rate is the number of churned subscriptions in the past month divided by the number of active subscriptions month ago.
According to industry standards, growing SaaS businesses should aim for a CLV:CAC ratio of 3:1 or higher.
Mind that using this method to measure customer acquisition is among the best practices for middle and big size companies that already have a consistent acquisition "momentum". Smaller companies should look for a less complex methodology. An approach is presented in the following sections.
Customer Acquisition Funnel: A User Acquisition (UA) Model
App user acquisition is traditionally visualized as a funnel: a series of steps your user goes through to complete an action.
Having this model makes it easier to have an overview of how your UA campaigns come together.
The following chart by June displays a two-step funnel along with the corresponding conversion rates:
More generally, a user journey to acquisition is broken down into five steps.
Understanding each step is how you create a repeatable UA marketing process.
Awareness: Getting People To Learn About You
The average SaaS user takes 1 to 3 months to become a customer. A UA campaign really is about nurturing a relationship where you need to communicate value and build trust.
Product-driven content marketing is the way to go about increasing awareness: search engine optimization (SEO) marketing, but also paid ads, social media, word-of-mouth, and public relations events. Finding the right channel for your business depends on your customers, as you will see in the section “Finding The Right Acquisition Channels”.
Content addressing product costs, features, and competitors subtly highlights your relevance to your customers’ needs. Promotional copy doesn’t work as well: you need your brand’s tone to remain objective to stay transparent when showing value, which is the basis for brand trust.
Insightful stories about your team, your brand's mission, and your customers are also important to arouse strong emotions: buyers make more decisions based on how they feel about you than what your product does.
Engagement: Getting People To Interact With You
This is the step where you further teach your leads about the industry you’re in and how your product is a resource addressing common pain points. As people regularly come back to consume your content, you become a trustworthy source of information that helps them do and be better.
You want to create a first engagement loop to get people to come back to you for more, using strategic call-to-actions (CTA): contact information, newsletter subscription, social network membership…
For your CTA to improve customer acquisition online, you will need to optimize your website as you learn more about your target audience: you need to improve your copy to make your customers the focus point.
Exploration: Getting People To Consider You
Once potential customers are aware they have a problem to solve and develop a buying intent, they will compare the different alternatives to pick the best one: you need to convince them to consider your product as a solution.
First, optimize your pricing page to give a complete and transparent picture of your different pricing plans. Complex pricing will turn people off, so good communication is key.
A good pricing strategy is just as important to make sure it corresponds to your users’ needs. You can use your product’s power user curve to make decisions on your pricing model:
If your best customers use your product at work during the week, or everyday, charging per seat is worthwhile: your perceived value increases with usage, so it feels normal for people to pay on a monthly or yearly basis.
If engagement doesn’t correlate with delivered value on the other hand, consider usage-based or one-off pricing to reflect the reality of your product. A user is less likely to pay a monthly subscription if he/she only visits the app every once in a while.
Consider adding a free trial, a Frequently Asked Questions section, a live chat, testimonials, and reviews to convince leads to convert. The exploration phase is really about demonstrating the value that your customers will gain from using your product while minimizing the risks involved for them.
Power users curve can be used for many other purposes, here is an article with some use cases.
Conversion: Getting People To Buy From You
There will be a day when someone becomes a paying customer and you will make your first dollar online. But it won’t stop here: you will have to constantly look for better ways to optimize the conversion rate at each step of your marketing funnel.
Armed with the data of a complete user journey, you will be able to refine your strategy, diversify your approach, and find the best target markets to increase your signup conversion rates:
Retention: Getting People To Stay
Account acquisition doesn’t stop at conversion. Customer retention is just as important to create a viable acquisition strategy.
Without retention, your churn rate increases and your CLV:CAC ratio suffers for it. Already-existing customers are also more likely to share your product with their friends and acquire new customers in your stead.
The following June chart indicates how long your users stick around:
You can also follow the rate at which people get hooked after getting started with your product and how to improve it with the Activation chart:
Understand Who Your Customers Are
As we mentioned several times, the key to new user acquisition is knowing your customers. You can use the aforementioned power user curve, but also consult your list of active users in general:
With these elements in hand, all you have to do to improve your customer acquisition process is to understand who these people are, what they like and don’t like about your product, and which channels they used to learn about you
Finding The Right Acquisition Channels
As a rule of thumb, use the channels where your customers hang out, not the ones you are comfortable with.
The effectiveness of your user acquisition channels is measured by its CLV:CAC ratio. Studies show that email marketing and organic search engine optimization present the highest marketing return-on-investment―respectively 12:1 and 7:1 on a 3 year average―but it depends on your audience, your mailing list, domain, and your business.
Obviously, you want to prioritize channels with the highest CLV:CAC ratio, but you also want to diversify your channel portfolio to attract new opportunities, with paid user acquisition or social acquisition for example. You can always reduce your CAC by finding newer, cheaper channels leveraging marketing trends―like Tiktok back when it was still a relatively new social network.
Measure Acquisition With June
That’s it for acquisition 101. In this article, you’ve gotten a glimpse of what acquisition marketing is about, as well as tools and strategies to help you get started.
June offers analytics reports in just a few clicks, including acquisition analytics. All you have to do is to sign up using this form for free and connect your Segment account