Glossary Hub / Customer Acquisition Explained: Key Insights & Tips
Customer Acquisition Explained: Key Insights & Tips

Gaining new customers is essential to business growth, especially for new companies that are just starting out. A successful customer acquisition strategy will lead to lasting relationships, more customer retention, and greater business success.
What is customer acquisition?
Customer acquisition refers to the process of attracting and converting potential customers into paying customers. It is a fundamental aspect of any business’s growth strategy and plays a vital role in driving revenue and profitability.
This process involves various marketing activities and tactics aimed at reaching out to the target audience, creating awareness about products or services, and persuading them to make a purchase. Customer acquisition encompasses a wide range of channels, including online advertising, social media marketing, content marketing, email campaigns, and more.
For businesses, customer acquisition is of utmost importance as it directly impacts their growth and success. By acquiring new customers, businesses can expand their customer base, increase sales, and ultimately boost their revenue. Additionally, customer acquisition helps businesses stay competitive in the market and establish a strong brand presence.
Measuring the success of customer acquisition efforts is essential to evaluate the effectiveness of marketing strategies and optimize future campaigns. Key metrics used to measure customer acquisition success include customer acquisition cost (CAC), customer lifetime value (CLV), conversion rates, and return on investment (ROI).

What are the stages of customer acquisition?
While slight variations may exist, there are typically four stages of customer acquisition.
Stage 1 — Awareness: Potential customers learn about your brand for the first time through your team’s marketing efforts or their own research.
Stage 2 — Interest: Your business nurtures leads by providing valuable content or offers.
Stage 3 — Decision: After becoming interested enough to explore your business offerings, customers decide to engage further with your business, ideally by making a purchase.
Stage 4 — Retention: After the customer decides, your work isn’t done. Continue to check in with new customers to ensure they’re happy. Retaining customers after acquiring new ones will make your business more profitable, as loyal customers are more likely to buy more from you.
What is the role of customer acquisition?
Simply put, the more customers you have to purchase from your business, the higher the chance of increasing your profit. Acquisition increases the chance of building a loyal customer base and allows for better word-of-mouth promotional opportunities for your brand.
New businesses can’t gain a following without bringing in new customers. By strategically marketing and nurturing a potential relationship, your business can ensure that customers remember how helpful your team was, and they will be more likely to show interest in new products and services.
Is customer acquisition a key performance indicator (KPI)?
Key performance indicators, or KPIs, are metrics that inform whether your efforts are making an impact on your business. Customer acquisition is an important KPI for showing how well your business strategy is working.
Your current loyal customers are one of the best ways to promote your business. Happy customers typically share your products and services with other people if they truly feel the offering is high quality. Not gaining any new customers could indicate weak or irrelevant marketing efforts and not enough current satisfied customers.
Businesses keep track of customer acquisition KPIs to identify the communication channels that are working (for example, social media or email marketing), which campaigns received the highest engagements, and the customer acquisition cost that helps determine which strategies are working and which ones need to change.
How do I calculate customer acquisition?
Customer acquisition cost (CAC) is the total cost of your business acquiring a new customer. You can calculate CAC using the following formula:
Customer Acquisition Cost = Total Marketing and Sales Costs / Number of New Customers Acquired
For example, if a company spends $10,000 on marketing and sales efforts in a month and acquires 100 new customers, the CAC would be $100. This calculation provides valuable insights into the effectiveness of marketing initiatives and helps businesses assess the return on investment (ROI) for customer acquisition.
Let’s break this formula down. Customers are largely acquired through the efforts of marketing and sales teams. That work has a cost. Each person on those teams is paid a salary, of course, and they also require resources to do their jobs, spending budget on tools and platforms, advertisements, travel and more to reach and win new customers.
The number of customers acquired should only include those you have actually acquired, not those still in the potential customer phase of the buyer journey.
CAC is crucial to business success because it shows if your efforts are profitable or costing your business more than they’re worth. This formula shows if you are getting the most bang for your buck or if the company’s spending in sales and marketing efforts outweighs the number of new customers you’re gaining over a specific period.
How do you track customer acquisition?
There are many tools and metrics to help you track customer acquisition.
A customer relationship management (CRM) platform is an excellent tool for monitoring leads and seeing where they are in the sales funnel. You can automate emails and data capture, look for new leads, and evaluate performance.
Marketing analytics platforms can help you measure campaign performance, improve audience segmentation and overall decision-making, and efficiently acquire new customers.
Setting up CRM dashboards will help you visualize customer acquisition trends and performance over time on these platforms. Some common metrics to look at include:
Customer acquisition cost: The total cost of your business acquiring a new customer.
Conversion rate: The percentage of leads that convert to paying customers.
Customer lifetime value: The total value of a customer over the duration of their relationship with the business.
What is the average customer acquisition cost by industry?
CAC is influenced by the platforms your business invests in and the efforts of your marketing and sales teams. Some industries have higher average CACs simply because of the line of work it involves — it may take more effort to get a customer interested and invested in the company.
For example, a report found that the legal services industry has higher CAC because it’s highly competitive. The cybersecurity industry, on the other hand, which uses more SEO content and generative engine optimization (GEO), typically has a lower CAC.
Here is the average CAC for various industries:
B2B SaaS — $239: Free trials and the freemium model help more customers take an interest in a brand, keeping CACs lower than other industries.
eCommerce — $86: SEO strategy and traditional Google search volume contributes to lower CACs for this industry, with Amazon making up a large portion of B2B eCommerce purchases.
Financial services — $784: Higher CACs in this industry typically come from partnerships with larger financial institutions and thought leadership marketing campaigns that use trend reports, white papers, and more.
What is a good customer acquisition ratio?
We know that customer acquisition cost is the cost of gaining a new customer. But another important metric to consider is the customer lifetime value (LTV), which is the total value of a customer to a business over the duration of their relationship.
The ratio of CAC to CLV can give you valuable insight into customers’ overall spending habits with your business. With this metric, you’ll know if you’re spending too much on a customer or need to invest more into your efforts.
The ideal CAC to CLV ratio is 1:3 — your business should make three times more from one customer than the cost to acquire them. A lower ratio, such as 1:1, indicates you aren’t turning a profit from your efforts.
Effective customer acquisition strategies
When it comes to growing your customer base, having effective acquisition strategies in place is crucial. Here are nine proven strategies for customer acquisition:
1. Content Marketing: Create valuable and engaging content that addresses your target audience’s pain points and provides solutions. This helps to establish your brand as an authority in your industry and attracts potential customers.
2. Social Media Advertising: Leverage the power of social media platforms to reach a wider audience. Create targeted ads that resonate with your ideal customers and drive them to your website.
3. Referral Programs: Encourage your existing customers to refer your products or services to their network. Offer incentives or rewards for successful referrals, which can significantly boost your customer acquisition.
4. Email Marketing: Build an email list and nurture your subscribers with personalized and relevant content. This helps to build trust and keep your brand top-of-mind when they are ready to make a purchase.
5. Search Engine Optimization (SEO): Optimize your website and content to rank higher in search engine results. By targeting relevant keywords, you can attract organic traffic and increase your chances of acquiring new customers.
6. Influencer Partnerships: Collaborate with influencers or industry experts who have a strong following and credibility. Their endorsement can introduce your brand to a wider audience and generate new leads.
7. Webinars and Events: Host webinars or participate in industry events to showcase your expertise and attract potential customers. These platforms allow you to engage with your target audience directly and establish meaningful connections.
8. Personalization: Tailor your marketing messages and offers to individual customers based on their preferences and behavior. Personalized experiences make customers feel valued and increase the likelihood of conversion.
9. Customer Retention: Focus on keeping your existing customers happy and satisfied. Providing exceptional customer service and ongoing support can lead to positive reviews and referrals, ultimately driving new customer acquisition.
By targeting the right audience, utilizing various channels and tactics, and implementing these strategies effectively, you can enhance your customer acquisition efforts and drive sustainable growth for your business.
How do I reduce customer acquisition cost?
Acquiring customers requires investment in time, money, and resources, but it doesn’t mean breaking the bank. The following tools and techniques can help you reduce CAC.
Optimize marketing channels
Focus on the most cost-effective channels, such as organic search through effective SEO strategy or referral programs, which reward current customers when they share your products or services with their network.
Leverage automation and AI
Use technological tools to streamline lead generation and nurture processes. Adding a chatbot to your website can help answer people’s questions and move them through the pipeline, while leveraging AI paywall capabilities allows you to determine and actively present the right offer at the right time to each user.
Target the right audience
Reduce marketing spend by improving the accuracy of targeting efforts, focusing on the demographics and behaviors of people who are most interested in your products. With audience segmentation, you can tailor your marketing to meet the specific preferences of distinct groups, improving engagement, retention, and conversion rates.
Referral programs and word-of-mouth marketing
Encourage existing customers to refer others to reduce reliance on paid advertising. Current customers will be more likely to refer others if they’re rewarded for doing so.
Improve conversion rates
To improve conversion rates enhance landing page design, include a clear CTA in social and emails, and make other process updates and journey improvements to turn more leads into customers at a lower cost.
Acquire new customers with Zuora
Acquiring new customers helps your business grow and succeed. By providing exceptional service for current customers, you can gather a following through referrals at a low cost.
By tracking your acquisition metrics, understanding your CAC, and continually optimizing your strategies to maintain healthy customer acquisition ratios, your business can be more profitable than ever. Regularly test your strategy and adjust where needed to stay ahead of the game.
Now that you understand the basics of customer acquisition, the next step is learning effective strategies to implement in your business. To help you get started, download our free guide: The B2C Ultimate Guide to Customer Acquisition and Retention. This comprehensive resource will walk you through proven tactics to acquire and retain new customers for sustained growth.