What Is Customer Acquisition?

Customer Acquisition Explained

A small business owner talks shop with her colleagues.
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Customer acquisition is the act of gaining new customers for a business. While the ideal method of customer acquisition differs from business to business, it is a critical part of any company’s survival. 

Below is a definition of customer acquisition and an outline of the various ways that businesses approach their acquisition strategies.

What Is Customer Acquisition?

Customer acquisition is when a business finds and persuades prospective customers to make a purchase. Ideally, customer acquisition is measurable and repeatable, not random. 

Depending on the type of business, a CEO may aim for customer acquisition via an immediate transaction or through lead acquisitions. 

In an immediate transaction, a customer engages with a product or service, then buys it practically on the spot. For example, an e-commerce dress business might be chasing an immediate sale when it advertises a product on Facebook and when it targets consumers who are currently searching for those dresses. 

Lead acquisitions dangle a product or service in front of a customer and keep them engaged for a later sale. For example, if a person is looking for a new accountant, they may go to a CPA’s website, fill in a contact form, sign up for a newsletter, and engage with a professional before the CPA signs them on as an ongoing client.  

Business owners could consider networking as a form of customer acquisition, including networking with influencers who might team up with them to sell a product to their followers. Other networking, such as networking with local galleries in order to sell paintings, can be considered a form of customer acquisition, too.

How Does Customer Acquisition Work?

When parsing out the phases of customer acquisition, marketers often refer to a funnel. Starting at the top of the funnel, the following steps are ways to move through leads, prospective customers, and, finally, purchasers. 

Awareness (Top Funnel) 

During the awareness phase of customer acquisition, a business owner advertises and networks its services to a target audience. For example, a seller of kitchen utensils might want to target older people who live in an area where people have a lot of kitchen space, such as the Midwest. Honing in on a target audience will help a business owner find their ideal customers and create awareness.

Consideration (Middle Funnel) 

Customers who go through the awareness phase have shown interest, but haven’t purchased a product yet. They may have shared an email through the company website, for example, or inquired about a service through the company chatbot system. At this point, they’re in the consideration phase, and your goal is to coax them into a purchase.

Purchase (Bottom Funnel) 

A potential customer is very close to converting if they’ve made it to this stage of the funnel. Perhaps they already have products in a shopping cart, for example. Businesses will typically send these customers further incentives such as a discount code to encourage deal-seekers to make a purchase. 

Budgeting for Customer Acquisition

Customer acquisition is a critical part of a business’s strategy throughout the entire life cycle of a company, Kendall Fargo, president of San Francisco-based marketing agency GrowMojo Corporation, told The Balance in a phone interview. A business must budget for customer acquisition, and ideally, the amount pays for itself when the customer is converted to a buyer. 

“Customer acquisition is a requirement to survive,” Fargo said. “You have to invest in customer acquisition. It doesn’t have to be extremely costly. If you're doing it right, your customer acquisition is paying for the growth of your business because you're making a profit off your customers.” 

For small businesses, most customer acquisition occurs online, Fargo said. This includes advertising through networking, online presentations, collecting data, and social media networks such as Instagram and TikTok. 

The cost of advertising online varies widely since it is usually customizable according to the business’s customer acquisition budget. Facebook, for example, says that a business can spend anywhere from $5 to $50,000 or more a week on digital advertising.

Typically, the more money a business spends, the more high-quality, targeted customers their ads will reach. According to Facebook, a good rule of thumb is to budget out at least 10 times the average cost of your goals. If a business wants to optimize their site for link clicks and each click costs $5, the daily ad budget should be at least $50.

Companies may choose to outsource their entire customer acquisition strategy to an outside marketing agency or do it entirely in-house. Both choices have a profound impact on budget and labor output.

Strategies for Improving Customer Acquisition

Advertise to a Target Audience on Social Media

Targeting an audience on social media is a quick, affordable way to advertise widely. Businesses can buy targeted ads through Facebook and Instagram and adjust their budgets depending on the results. Business owners can also network with audience-relevant influencers who advertise their products in exchange for a fee, revenue, or traffic share. 

Stay on Top of Trends

Customer acquisition technologies evolve constantly, so it’s important to stay on top of the trends. For example, TikTok is emerging as a critical platform for businesses because it has a massive audience and its advertising market is not quite saturated, Fargo said.

Further, evolving trends in data collection, such as analytics, may help companies predict their audience’s behavior and adjust their customer acquisition strategies accordingly.

Improve Presentation and Accessibility

Customers are more likely to make a purchase and remain loyal if a business’s product is presented well and the process is seamless. The company’s website ought to be professional and highly functional, for example. Advertising content should be high quality, any shipping ought to be timely, and a customer should be able to reach a customer service representative easily for help. 

Have a Call to Action

When creating advertising content, businesses will want to have a call to action, such as a free consultation, a sale of 25% off, or an announcement of a new line of themed seasonal products.

“You need a call to action at the end to get them to come...to your site [and] find out more,” Fargo said. “You really have to have something that grabs them.” 

Key Takeaways

  • Customer acquisition is when a business finds and persuades prospective customers to make a purchase. 
  • Most customer acquisition occurs through social media advertising and networking. 
  • In addition to advertising, product quality control, the purchasing process, and data collection are all parts of the customer acquisition process.