Dane van Zyl   |   27 Jul 2022   |   Customer Acquisition

What is a Customer Acquisition Model? And Why You Need One

It’s no secret that attracting new customers is hard...very hard.

In fact, the success rate of successfully attracting and selling to a new customer is only between 5-20%.

Or that it can be expensive. Very expensive. A recent study found that the cost of acquiring a new customer has increased by 60% over the last 6 years.

Nor is it a secret that we all have to attract more new customers to stay afloat – and grow. Selling, after all, is the essence of any successful business.

Yet, 69% of businesses also list acquiring new customers as their biggest challenge.

This is why having a scaleable, data-driven plan on how to acquire –and retain – new customers is so important.

That’s where customer acquisition models come into play. Let’s take a closer look at exactly what it is, what it entails and how it can benefit your business.

What is a Customer Acquisition Model?

If you get right down to it, customer acquisition is the process of bringing in new paying customers.

“Customer acquisition is the process of bringing new customers or clients to your business. The goal of this process is to create a systematic, sustainable acquisition strategy that can evolve with new trends and changes” – HubSpot

And a customer acquisition model is the road map of how an individual or business will go about doing this. In other words, the methods, platforms and strategies a company might use to gain (and retain) new leads.

It could look something like this:

Customer acquisition model
Image source: Sketch Bubble

But here’s the catch...

What’s defined as “acquisition” may differ between sectors and even companies, which is why there are so many different acquisition models that each need tailoring.

For a B2B company, for example, acquisition may be defined as qualified sales leads. So their model will then be created and tailored in such a way as to achieve certain set goals such as; “generating 100 new qualified sales leads per month”.

Matt Skinner the Senior Product Marketing Manager from Adobe explains it in this way:

“In some cases, organisations might run a campaign just to acquire email addresses, for example, so that they can do future marketing to those potential customers and call that customer acquisition. In other cases, some organisations might not consider it acquisition until a customer actually makes a purchase.

In addition, the tactics or channels you use (for instance a targeted email campaign VS a referral programme VS digital advertising), your audience and available resources will also play a role in determining your customer acquisition model.

How Does a Customer Acquisition Model Work?

Practically speaking a customer acquisition model should include the entire journey a buyer might take with your business, from first-time visitor all the way through to paying customer - the ultimate goal, of course.

Customer Journey
Image source: HubSpot

The goal of a successful customer acquisition model is not only to build brand awareness to attract prospects but to also inform and convert them.

Although models differ, what is consistent across all successful customer acquisition models is that the customer is at the centre of it all.

This is perfectly illustrated by the Flywheel model, which focuses all marketing and sales efforts around the customer. This is because, as HubSpot explains “with the flywheel, you use the momentum of your happy customers to drive referrals and repeat sales. Basically, your business keeps spinning.”

Flywheel

As Uku CEO Nathan van Zyl explains: “The flywheel approach focuses all your customer acquisition and retention efforts around your customers and as you successfully acquire and retain customers, your flywheel starts to generate momentum that drives your business forward.”

A customer acquisition model based on this approach will consist of two layers:

Customer Acquisition Model

The Foundation layer consists of all your marketing and business goals and matching these to the business’s target customer.

The Execution layer dives into the content, channels and data a company needs to attract their target customer. It will also help identify what tools are needed to successfully execute their strategy.

How To Choose a Customer Acquisition Model for Your Business

So if acquisition can take on a different definition for each industry and even company, how do you know which model to choose for your business?

The answer is all and none of them, really. You see, that’s because there is no one-size-fits-all, off-the-shelf acquisition model available for purchase. Instead, each company has to craft a customer acquisition model that is aligned with its larger strategy.

This model should help a company generate new business, keep customers loyal and increase revenue in a cost-effective way.

To develop such a model, you will have to take the following into consideration:

  • The type of business you run
  • Your budget
  • Who your target audience is and how/where they prefer to be reached as this will dictate the channels your model is made up of (more about this in just a second...)

What is important though is that whichever model you choose to achieve success, you need to make sure that your CAC (cost to acquire a customer) is less than the LTV (lifetime value of the same customer) for it to be sustainable.

LTV VS CAC
Image source: Product Plan

Now back to channels...

Your customer acquisition model will be made up of channels that will dictate how and where you will connect with your prospects. These can include both offline and online channels, and be both free and paid for.

Offline acquisition channels include:

  • Events
  • Television
  • Radio
  • Print ads
  • Direct mail
  • Cold calling
  • Trade shows and expos

Online acquisition channels include:

  • Website
  • Social Media
  • Blog
  • Email
  • Social media
  • PPC advertising
  • Influencer marketing
  • Search marketing (SEO and SEM)
  • Affiliate marketing
  • SMS marketing

A customer acquisition model making use of paid and free online channels may look something like this, for instance:

Customer Acquisition Model
Image source: Power Slides

Which channels you choose to use will, ultimately, as we said before depend on your business, your budget and your target audience as some channels work better for certain industries than others.

“Finding out product and channel fit is a question of balancing your marketing resources and consumer preferences. While deciding which new channels to choose, always adopt a ‘customer backward’ approach, which means selecting a platform based on where their preferences take them. Also, check before leaning in and keeping an eye on your measurements and testing” - DataDab

For instance, LinkedIn works best for B2B while Facebook and Instagram are better for B2C. In fact, in the below graph it is clear that B2C favours Facebook above any other social media platform as a channel for content distribution and client acquisition.

Image source: DataDab

Email marketing, on the other hand, works wonders for both B2B and B2C, with marketers reporting that it consistently delivers the highest ROI.

Image source: DataDab

It also offers the best ROI and lead generation opportunities for SaaS businesses.

Image source: First Page Sage

For SaaS companies, a customer acquisition model needs to focus on relationship building first and foremost. That’s because the average SaaS sales cycle lasts 84 days because of high product costs, privacy issues, huge competition in the market place and complicated product features. During this period a prospective client will require a lot of good information and client service. That’s why when it comes to customer acquisition models for SaaS companies, one of the biggest channels to focus on is personalised email marketing and a company’s website.

Your website should not only offer relevant, informative content but be SEO-optimised, mobile-friendly, user-friendly, display relevant CTAs and, ideally, feature chatbot functionalities to respond to customer queries IRT.

In addition, as the graph below shows, Facebook and Twitter are social media channels SaaS companies can benefit from and should include in their customer acquisition models.

Image source: Business2Community

Whichever channel you choose to make up your customer acquisition model, remember to regularly assess their effectiveness and run A/B tests one at a time per channel to see which delivers the best results.

Why You Need a Customer Acquisition Model

There are multiple benefits to having a proper customer acquisition model, including:

  • Effectively attracting more potential customers.
  • It allows businesses to scale and generate more income. Stats show that a 1% increase in acquisition efforts directly leads to a 3.32% increase in a company’s bottom-line revenue.
Improving acquisition
Image source: ProfitWell
  • More growth equals more profit, which is important to shareholders.
  • It allows you to scale marketing efforts whilst driving long-term value.
  • Converting new customers shows traction. It means your products or services are relevant and wanted in the current marketplace.
  • It allows you to measure marketing ROI by providing data on CAC and LTV, and make adjustments accordingly.
  • A good customer acquisition model will result in happy customers, which means retained customers and a lower CAC. In fact, a 1% improvement in customer retention efforts can increase revenue by 6.71%. Plus, these loyal, returning customers can serve as brand ambassadors and refer others to you, which is important as 92% of consumers trust word of mouth over ads or marketing.
  • Attracting better-quality customers can be the basis for loyalty programmes.
  • It provides you with a roadmap to base marketing and sales efforts on for a streamlined, unified approach. One study found that aligning sales and marketing efforts can cut acquisition costs by 30%.

Read more: Here’s why you need a customer acquisition strategy

Key Takeaway

Customer acquisition is not only crucial for growth but many industry leaders also see it as the first step in developing a sustainable and scaleable relationship with customers new and old.

This is why the importance of a well-considered, data-driven customer acquisition model that is aligned with your company’s goals and objectives cannot be underestimated. A strong customer acquisition model is not only the roadmap to growth these days but also the engine that drives it.

Customer Acquisition

Dane van Zyl

Mostly I double as Robin when Batman needs me! On the side, the Co-Founder and CEO at Uku Inbound. Inbound marketing enthusiast. HubSpotter. Vegan. Amateur Voice Actor.