How big data can help cut customer acquisition costs

Recently, the average CAC across industries has been rising. What’s the problem?


Customer acquisition cost (CAC), the expense involved in identifying and onboarding a given customer, is a primary predictor of business success, but, recently, the average CAC across industries has been rising. What’s the problem? With growing access to enticing offers and industry disruption, businesses are making an initial sale, but failing to ensure loyalty. In other words, lifetime value (LTV) isn’t counterbalancing CAC because customers aren’t sticking around.

In order for businesses to rebalance their finances and increase LTV, they need a data-driven boost. Data systems can help companies identify the most value conversion streams, reduce spending waste, and increase lasting conversions despite the competition. These two simple data strategies can help.

Beat The Churn

Customer churn is defined as the group of individuals who make a single purchase from a retailer and then never come back – and this phenomenon can be deadly for businesses since it’s six to seven times more expensive to acquire customers than retain current ones. What many businesses don’t realize, though, is that the solution to church isn’t always retention. Instead, by considering current sales patterns and available services, businesses can determine whether they’ll thrive by expanding offerings or emphasizing referral services.

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One of the leading reasons that customers fail to make repeat purchases is because your business doesn’t provide sufficient customer service or post-purchase product support. Coupled with poor onboarding practices, service failures can sabotage your business. But enhanced customer data can help.

Modern businesses are building complex customer profiles that combine traditional data points like average time using a website, time to conversion, and last log-in, with more personalized information. For example, marketing analytics brand Localytics offers a customer profile framework designed to help increase customer engagement. These profiles give brands the information they need to keep customers coming back. And to fight inevitable losses – they happen to everyone – businesses should bulk up referral programs, reducing CAC by shifting the effort onto existing customers with established relationships.

Track Your Channels

Cutting back on churn is all about putting an end to pasted time; when a customer makes a purchase and then drops out, everything you’ve spent to onboard them goes along with them. As part of reducing churn and minimizing financial waste, then, it’s important to determine which channels serve as the most reliable conversion points.

The simple fact of sales is that, due to differing demographics, some marketing channels are better at identifying customers and driving conversions than others, but it’s not always clear to businesses where customers originate. But when its clear where customers are coming from, companies are able to pull back on spending through unsuccessful channels and reduce CAC per marketing channel simultaneously. This raises the question: how do you identify an individual’s conversion path?

If we think back to the days of paper coupons and mailings, many companies tracked marketing success by applying source specific codes to each mailing – and a similar practice still applies. Almost any website analytics programs can identify how customers navigate to your site, whether they entered a search term in Google or clicked through a link on another site. And companies like Phonexa offer call tracking services that can help companies determine what campaign attracted a given customer.

As in the coupon example, call tracking often involves applying different numbers to each campaign, but modern data systems mean businesses can also amp up such tracking practices. For example, phone tracking paired with interactive voice response can preemptively identify customers as they call in, allowing service providers to call them by name, see their purchase history, and more – all in the name of better service.

If your business is going to decrease CAC, they’ll need a better understanding of where customers come from and what they expect from providers – and that demands service-oriented data. We’ve got systems that can track every tiny detail of customer interactions and purchase histories and it’s important to utilize them fully.

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