Customer acquisition, as the name implies, is the process of gaining new consumers. It involves identifying, finding, and ultimately persuading people to hand over their hard-earned money in exchange for your product or service. The customer acquisition strategy you develop and the tactics you employ should be measurable, repeatable, and scalable.

There are specific activities, resources, and dollars you will commit to bring in new customers. However, there’s an entirely separate set of activities, resources, and dollars you must budget to keep your customers coming back and buying more from you. Some of the tactics you use to acquire and retain customers overlap, but these activities are distinct enough that we’ve covered customer retention in a separate guide.

To efficiently gain new customers, here’s why your business needs a thoughtful strategy for customer acquisition:

Content generation is expensive. In the last five years, the cost of acquiring new customers has increased by over 50%. It’s very easy to waste money if your strategy is not well-thought-out and tested.

Finding the “right” cost to acquire a customer is a combination of market research and hypothesis-driven experiments. Your goal is to find the channels, message, or creative that can yield high-quality customers at the lowest possible cost to your business.

In this guide, we’ll cover the basics of customer acquisition:

1. Analyzing the customer journey
2. Measuring the success of your customer acquisition strategy
3. Leveraging paid, owned & earned media
4. Embracing the customer acquisition ecosystem
5. 7 inspiring case studies
6. Resources we love
7. Takeaways & next steps

The customer acquisition funnel and the customer journey are good frameworks to help you visualize what assets, tactics, and channels you need to deploy. These graphics capture your future customer’s decision-making process.

The customer acquisition funnel

The funnel represents the journey your customer goes through, starting when someone first becomes aware of your brand. Acquisition ends when someone purchases your product for the first time; at this point, customer retention becomes the goal. (Check out our guide on why customer retention matters.)

One challenge with the funnel model is that it paints a picture that the customer journey is linear. Sometimes the journey from awareness to purchase is short and direct, but more often it’s long, meandering, and indirect.

The customer journey depends on many factors including:

• How high-intent the category is
• Absolute and relative price of the product
• The product’s importance in customers’ lives
• Whether the product category is established or not
• Competitive landscape
• Availability of substitute products

An alternative model is McKinsey’s loop framework, which delineates the decision-making process into four phases.

In this model, the customer’s path to purchase involves:

1. Initial consideration, based on brand perceptions and exposure to recent touch points
2. Active evaluation, or the process of researching potential purchases
3. Closure, or when a consumer buys from your brand
4. Post-purchase, when the consumer experiences your product and brand and decides if they’ll buy it again

Both frameworks—the funnel and the loop—underpin how your acquisition strategy will identify an individual’s readiness to purchase your product. Your task is to remove obstacles and encourage prospects to complete their journey and ultimately become a paying customer.

How do you know if your customer acquisition strategy is a success? Start with ROI.Customer acquisition cost (CAC) is a measure of the costs associated with bringing a new customer to your business, including marketing, events, and advertising expenses. This key metric tells you the return on your investment, proving the success of your customer acquisition strategy. For instance, if a marketing campaign is costing you more in CAC than each new customer is spending at your business, you need to rethink your customer acquisition strategy.

‍What you should know:

• Calculating CAC is not a perfect science. At a high level, CAC is simply your marketing costs divided by the number of customers acquired. However, sometimes CAC is directly attributable to a specific marketing campaign (e.g., Facebook advertising) and other times not (for instance, PR). A billboard someone saw may have “greased the wheels” and made this person aware of your product. But that same person may also see a Facebook ad a few months later.
• From a measurement standpoint—and Facebook pixel standpoint—that second touch is where the funnel begins. The billboard may have made it easier for an individual to take an action in a digital environment—click through or purchase—but data can’t directly support that hypothesis.

As such, CAC can be imprecise in its measurement and attribution. Be aware that there are many inputs and drivers that influence purchase decisions. Understand what is included in the metrics you are looking at, and do not rely on very high-level statements made around CAC.

It involves identifying, finding, and ultimately persuading people to hand over their hard-earned money in exchange for your product or service.

You can calculate CAC easily for your Facebook campaigns, Google Ads, affiliate marketing, and influencer spending. Each of these marketing efforts will have a different customer acquisition cost, depending on your industry. But here are some benchmarks to keep in mind:

• Facebook: Nearly half of marketers report a CAC of less than $10. Of course, absolute price point of your product, along with many other factors, influence a brand’s CAC.
• Google Ads: Measured in cost per action, ranges from $23.68-$143.36.

As prospective customers move along the path to purchase, your brand gains more and more control of the context and the message. A shopper interested in your product may look at your website, read reviews about your product, and visit your social media channels. For the most part, these are all marketing avenues where your brand controls the message.

There are a number of ways that consumers learn about your product. One simple framework categorizes messaging and context into three buckets: paid, owned, and earned media.

Customer acquisition: 3 types

While there’s obviously overlap, these three categories contextualize which levers to pull to make customers aware of your brand, cultivate familiarity with your product, and ultimately convert someone into a paid customer.

Paid media and outreach

Paid media is advertising that your business pays for. Traditionally, this would include TV advertisements, radio, and print advertising. In today’s digital world, this includes:

• paid social media posts
• paid search
• display ads
• retargeting
• affiliate/referral marketing programs

Owned media and outreach

Owned media consists of content that you publish—as well as community conversations that you generate—on channels your company owns and controls. This could include your:

• website
• blog
• social media channels

Owned media is driven by your content marketing strategy. Content marketing includes imagery, text articles, and videos. Often, your brand promotes owned media via paid outreach or organically on social media. This is key to getting more eyeballs and broadening your reach.

Earned media and outreach

Earned media consists of all the content and conversation around your brand or products that has been created by somebody else and published somewhere other than your owned channels. Earned typically includes:

• media relations
• influencers
• professional recommendations (e.g., dermatologists)
• credentialing (e.g., association recommendation)

Earned media is the murkiest in terms of calculating your customer acquisition costs. It’s gained as a result of your efforts in paid and owned media, which get amplified through press coverage, unpaid social media mentions, shares, and online reviews.

Mentions in earned media, when they’re positive, are great for your brand’s credibility. Of course, the opposite is also true—if your product is shoddy or service is indifferent, earned media will make sure that message spreads via word of mouth.

There’s no one-size-fits-all approach to leveraging your paid, owned, and earned media to acquire customers. Most experts recommend you allocate activities and resources across all three to get the maximum benefit from your activities. Test, adjust, and repeat.

When a brand is starting from zero, it’s crucial to build a certain level of awareness quickly. Acquiring a certain threshold of attention quickly tends to compound the efficacy of all your marketing efforts. This allows you to ride the groundswell and start moving many prospective customers down your acquisition funnel.

But where should you start? Below are some best practices for how to allocate your resources and efforts across the three media types.

1. Start with the basics of owned media

Get your house in order: Your owned media is critical for customers to convert. Focus first on your website. There’s no reason to spend money on ads driving potential customers to a site that provides a poor experience. At best, you would be missing conversions and wasting your money. At worst, you would be compromising your brand’s credibility. Invest in crafting your content and site structure with SEO in mind.

The same goes for owning your social media presence. Make sure to own the right social media handles to drive trust that your brand is credible. When a potential customer hears about your product from a friend (or other earned media), they’ll generally search for your brand on one of these channels (depending on your category):

1. Google
2. Instagram
3. Amazon
4. YouTube
5. TikTok

Make sure you have a presence on any or all of these channels to drive consumer trust. While this isn’t an exhaustive list, it’s a good starting place for most brands. You’ll also want to consider researching where your core customers are hanging out and then build a strategy around that.

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2. Test your core strategy using paid media

Paid media is usually the place to test whether you have a true business on your hands. It offers the ability to communicate your brand and product proposition in a way that resonates with people in the real world. Success with paid media signals that you know how to reach the right consumers and you can efficiently drive them to take action.

Facebook/Instagram has been the go-to channel to test the strength of your paid media strategy. Facebook offers the benefit of immediate feedback, highly specific targeting, and, historically, at a lower cost than most other platforms. It’s not difficult to establish a presence on Facebook and Instagram; creative content can be done cheaply.

3. Expand outward with paid and earned media

Paid search is often overlooked, but can do a lot of heavy lifting— particularly if you have a sound organic and paid search strategy. Use paid search advertising to learn if there are clear search patterns for your category and business.

Paid influencers and partnerships can also be leveraged once you’ve tested the strength of your on-page conversions, ad targeting, and keyword strategy.

Why it matters: Research by HubSpot found that 80% of marketers say influencer marketing is effective; 89% say influencer marketing works just as well, if not better, than other channels. Whether or not you choose to work with an influencer depends on your category and the profile of your target customer.

How to measure: Surveys that ask how you heard about us

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Public relations is often overlooked as it’s assumed to be expensive and is difficult to measure the impact.

Why it matters: While you won’t be able to see direct association, the channel can be a workhorse if done right. You can start with simple things like getting your brand or product included in things like listicles, roundups, gift guides, and trend reports. These often don’t require heavy lift on your part and can drive traffic. You can also leverage this type of coverage in your paid advertising creative and leverage on your website to drive SEO.

How to measure: You can also identify the journalists (freelance or with a specific outlet) that cover subjects for which your business is relevant and reach out to try to form a relationship. Generally a pushy “please cover my product” will not work. But you can find traction by offering something of value to them—a trend you’re seeing from your customers, or unique and relevant data you’ve captured in the course of your business.

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Out-of-home advertising: Is it worth it? The short answer: probably not.

Why it matters: In our experience, OOH advertising such as billboards or banners on the side of a bus work best for a hyper-local campaign or city-specific strategy. OOH can help you raise awareness, but in isolation, won’t have a high ROI. Use OOH to drive purchase consideration, brand awareness, or app downloads. Plan to use OOH to promote other owned properties rather than to drive conversion.

How to measure: Surveys that ask how you heard about us

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Affiliate marketing relies on paid partners that link to your product from their website.

Why it matters: Affiliate marketing can be a good alternative or supplement to influencer marketing.

How to measure: Every time a visitor purchases your product from clicking an affiliate’s link, they earn a commission.

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Referral marketing taps your loyal customers to spread the word about your brand.

Why it matters: It rewards evangelist consumers with incentives—either monetary or something exclusive, like a membership or limited access to your brand’s new products.

How to measure: New customer referrals per user

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Other paid channels such as television, print, radio, video, digital display can be tested over time as well. To reduce risk, you can test digital TV or over the top to see if the channel works for your brand and product. Traditional television can drive fast awareness among your audience, especially if your target is older.

Podcasts have become all the rage, and a medium that is growing in popularity.

Why it matters: At the core, these are nothing new—radio hosts have always been a brand’s best friend. Podcasts are just the latest generation in radio marketing. The space is evolving quickly, but we’ve found that it’s best if there is some kind of tie between the show and your product (e.g., the host has used your product and refers to that).

How to measure: Surveys that ask how you heard about us. You can easily understand demographic skews for different genres and work with a holding company [e.g., Wondery] to achieve reach fairly quickly.

In June 2021, Spotify acquired Podz for its machine-learning technology that identifies high-quality podcast clips. Learn more about the power of audio in M13’s Future Perfect event: The Future of Communications:

What does customer acquisition look like in each of these scenarios? We’ve collected stories below of how some brands leveraged paid, owned, and earned media to reach new customers at different stages of their growth.

1. Still building an audience

What: Kettlebell Kings’ social media strategy

How they did it: The Australian workout equipment retailer used Instagram to build a loyal following from the start. The brand leveraged its owned social media to publish instructional content on how to use their kettlebells and other gym apparel for a great workout. They encouraged followers to post their own videos, benefiting from re-postable user-generated content, word-of-mouth promotion, and building category dominance in the process. The brand’s community building efforts led to seven-figure growth and currently 240,000-plus Instagram followers.

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2. Scaling with steady traction

What: Sephora’s community strategy

How they did it: The cosmetics retailer capitalized on its active audience by creating an online forum, building a community where people could share advice, looks, and makeup tutorials. The brand gained an entirely new owned channel where word-of-mouth promotion, influencer marketing, and user-generated content could all live on the Sephora website—just a few clicks from a buy button.

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3. Cultivating a loyal audience

What: Dropbox's successful referral system

How they did it: By capitalizing on its existing customers to build momentum, the brand offered 500 MB of additional storage for inviting a friend to join. When the friend signed up, they would also receive 500 MB of extra storage—making it a win-win for all parties involved.

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4. Ready to scale significantly

What: Daily Harvest’s exponential scaling strategy

How they did it: Daily Harvest found itself needing to scale quickly during the COVID-19 pandemic, when demand for healthy food delivery skyrocketed as restaurants closed and grocery store lines lengthened. During the pandemic, Daily Harvest used their Instagram and other owned channels to communicate how they were bringing more farmers into their supply chain to meet demand in a safe way. The brand added double the amount of inventory and continued delivering to what Forbes calls “a generation too busy, too tired or too quarantined to prepare their own meals.”

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5. Running out of money

What: Bird’s international growth strategy

How they did it: Like other electric scooter companies, the brand is facing financial headwinds before the impact of COVID-19 quarantine made its financial situation more tenuous. Bird recently tried to pivot their market position with vehicles with self-cleaning handlebars and brake levers that can be used for delivery services. We can’t predict the future, but in their shoes, we would reposition the brand as an alternative to crowded transportation following the pandemic. Spend every marketing dollar on those channels that maximize ROI. Begin working with local governments to subsidize e-scooters and deploy the fleet for essential workers to get to work safely. A year into the pandemic, Forbes reported that Bird was focusing on expanding in 50 new European cities.

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6. Receiving an infusion of cash

What: Capsule’s city-by-city strategy

How they did it: The pharmaceutical delivery company raised $200 million in a funding round in 2019. Capsule’s strategy in New York City included banner ads in subways and other OOH placements, as well as social media. By 2021, Capsule had expanded beyond NYC to more than a dozen markets including Los Angeles, Chicago, and Minneapolis. In April, the startup announced a $300 million round.

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7. Facing new competition

What: Peloton’s competitive approach

How they did it: The exercise equipment company may have been the first to market with their high-tech workout experience, but competition is catching up. Echelon, NordicTrack, Zwift, Schwinn, and Keiser M3i all launched alternatives to Peloton’s stationary bike; brands like Mirror and Tonal encroach on Peloton’s market position from the virtual at-home workout angle. With the COVID-19 lockdown, many consumers are shifting to working out at home and seeking fitness content online, with or without expensive equipment. Peloton, in response, is holding its own. Their strategy might involve tighter targeting to mass-affluent consumers in suburban areas (with homes large enough to accommodate their equipment). They might also consider adding a premium-priced layer to their subscription content to maintain their elite status in a more crowded field. Likewise, Peloton can capitalize on their first-to-market reputation to continually position their product as a good investment compared to new market entrants.

Many resources and tools are readily available—and economical—to help you and your team manage an agile product development process. For starters, take a look at these recommended reads and technologies.

Must-reads

Creating the Lean Startup [Inc.com]

I’m a true fan of articles that share real-world learnings which have evolved into market norms that we practice every day in the workplace. In 2011, Eric Ries wrote a book that transformed the way in which people thought about product development. “The Lean Startup” introduced the modern—and now best in practice—approach toward product development, inspired by the ability to iterate and evolve at hyper speed in the online services economy.

Prior to the release of this book, however, Eric was a successful CTO, having built IMVU, a disruptive messaging app founded in 2004 that boasted millions of users and over $50 million in revenue in 2011. This Inc. Magazine article, which was written following the release of Eric’s industry-changing book, recounts the product challenges and experiences he faced that allowed him to develop the lean methodology. The article demonstrates the moment of realization of how things could be done better—and sets the field for modern product practices.

A Quick 5-Step Guide to Lean Product Development [Dozuki]

There’s nothing like a step-by-step guide to business excellence; I’m a big fan of lean methodology in the process of building products and taking them to market. However, there is often confusion related to two main questions around this approach:

1. Is this for software/services only, or can it be applied to a wider set of product offerings?
2. How is this different from a traditional approach, and how do I know which one I am executing?

Dozuki provides enterprise-level workflow software to drive more efficiency in teams. This blog article is a great encapsulation of lean methodology that is not industry-specific and clearly illustrates the different choices being made between lean and traditional methods.

As true evangelists of the lean approach, Dozuki provides a great guide on the decision criteria and processes to be undertaken to optimize the product development process in this easy-to-follow summary.

‍How Superhuman Built an Engine to Find Product-Market Fit [First Round Review]

‍I always really enjoy reading stories by entrepreneurs about their growth and learnings as they face challenges and introduce unique approaches in their areas of expertise.

Rahul Vohra is CEO and founder of Superhuman, an email management platform that has established a tremendous following even while in stealth mode. Even though they’ve been onboarding tens of thousands of users already, they boast a waitlist of over 250,000 applications to use their service. Superhuman is a true example of product-market fit and a poster child for lean product development and mastery.

Superhuman faced a meaningful challenge in trying to practice agile development while limiting their access to public market feedback. They mastered the art of solving for product-market fit by asking their limited number of test users one simple question:How would you feel if you could no longer use Superhuman?‍

‍A) Very disappointedB) Somewhat disappointedC) Not disappointed

‍The theories behind metrics they collected and what those meant are detailed and well-defined in this article. I believe this is a very repeatable practice for other firms in their early stages of product development.

Process management tools

• Clubhouse.io is the issue-tracking tool M13 recommends first for smaller teams and startups. Like its competitor tool JIRA, it accommodates defect tracking and agile project management. As your team ramps up in size, JIRA may provide a more robust solution for your evolving needs. SamePage, WorkOtter, and ProjectManager are also good issue-tracking tools for early-stage startups.
• Basecamp is a web-based project management tool that offers to-do lists, milestone management, forum-like messaging, file sharing, and time tracking. It’s perfect for deliverable management and archiving— especially creative deliverables. Interested in a couple of alternatives? Check out Trello, Asana, or Monday.

Communication tools

Keep remote product teams connected and collaborating seamlessly with these communication tools: Slack, Zoom, Chanty, or RocketChat.

Moving toward product-market fit takes an agile methodology, a commitment to customers, and a willingness to test and learn nonstop.

As you consider your approach to customer acquisition, focus on efforts that can be measured. Your acquisition strategy is only as strong as your ability to measure your customer acquisition cost. Look for channels that are (relatively) easy to track metrics like ad views, click-through rate, and ultimately, purchase.Other things to keep in mind:

• Content can quickly eat up your budget. Many marketing teams spend more than half their social media budget just on content creation.
• Be surgically precise about where you allocate content resources. Just because you see one brand using Snapchat doesn’t make it the right channel for your product.
• Go where your consumers are, and make sure you’re able to convey your message on that channel. For instance, Facebook is tactically blocking ads for certain categories. If you’re marketing a new brand of workout equipment, your ad may be swept up in a filter banning nudity if you post a shirtless athlete using your gear. Do your research before you spend money on any major campaign.

Once you’ve mastered the ins and outs of customer acquisition, you’re ready to tackle the art of customer retention and develop a data strategy to optimize your marketing budget.

A Startup Founder’s Guide to Customer Retention

Creating a Data Strategy to Drive Better Decision-Making