January 6 2020

Customer Acquisition Cost, commonly referred to as CAC, is a key business metric used by businesses around the world. The elementary motive behind carrying out CAC calculation is to determine the complete cost of obtaining a new customer over a definitive period.

From a business outlook, a lower CAC has better long term implications. If your customer acquisition costs happen to be less than your Average Revenue Per Paying User (ARPPU), then you are making money over the long-term.

CAC is an important metric in the world of mobile app development and marketing as well. The cost of acquiring users and marketing your app keeps increasing with every passing year. If you want your mobile app to expand its customer base and make a profit, then it’s extremely essential to understand the significance of CAC and ways in which your team can lower it. 

Here are three hacks that can aid you in lowering the cost of acquiring customers without having to abandon any aspect of your marketing campaign.

Hacks that have got your back!

1) Make use of Partnerships or Referral Marketing to slash your CAC

All your digital marketing efforts are valueless if they’re not getting leads your way. And all those leads are worthless if they’re not converting into app users. CAC calculation aids in regulating the resources that are required for an organization to entice new customers and continue progressing.

If your customer mentions you to a potential lead from their network who might already have been interested in learning about the service you offer, their specific CAC will be $0 if they convert. These customers acquired through word of mouth marketing will reduce your CAC over time. 

A referral program your customers will readily participate in is crucial for bringing down your customer acquisition costs. If your app integrates in-app purchasing, this method is paramount to new user acquisition and increased customer satisfaction and loyalty. 

Partnerships and referral marketing are also pretty vital if ‘network-effect’ happens to be something your mobile application relies on and requires user interactions to take place on a regular basis. 

Apps that follow the referral marketing model frequently encourage a localized user base for the application. These users then encourage their networks to enroll so they can avail the referral rewards and incentives offered.  

This user acquisition strategy basically makes the task of using the app for first-timers a seamless yet rewarding experience. It also results in the users performing the tedious task of advertising for you which is the key to lowering the CAC with referral marketing.  

Setting up a referral rewards program that gives incentives to the existing users and offers potential customers something complementary in the form of joining bonuses might sound counter intuitive, but it leads to positive word of mouth and more engaged users.

At the end of the day, the efforts and resources you put in for user acquisition will only give compounding results in the long run. 


2) Invest in better User Experience & Product Thinking

Your customer acquisition cost will remain unbearably high if your mobile app isn’t up to the mark, fails to meet the needs of the intended users and offers a drab user experience. In order to succeed at the app stores, your app must be useful, provide an engaging user experience and give more valuable offerings than what your competitors provide. 

“Life’s too short to build something nobody wants.” ― Ash Maurya

Successfully marketing an application that has a complex use case, is hard to use or poorly designed is a futile task that isn’t likely to yield the desired results. The user experience your application provides is what primarily dictates whether your customer acquisition cost will go down or remain high.

Customer acquisition starts with product thinking and user experience design. These two things can either make or break your customer acquisition costs drastically. 

The ability to directly link to a specific item or screen in your mobile app so users are directed to what they’re looking for also factors in user experience design. App deep linking is something one can incorporate when it comes to improving the app’s performance and eventually, it’s overall user experience. 

Testing, monitoring and improving your mobile application to deliver an engaging user experience is a foolproof method to lower customer acquisition costs. Why? The more leads you’re able to push further down the customer acquisition funnel from your marketing spend and convert into customers, the lower your acquisition costs will be. 


3) Use content marketing along with paid online advertising

The greatest benefit of paid advertising is you can effortlessly keep a tab on where your money is being spent. You can track the number of conversions the money you have invested has resulted in, allowing you to calculate your cost per customer acquisition and adjusting cash flows accordingly.

However, you have no way of ensuring that the audience your ads are being displayed to is even a part of your target subset. More often than not, your ads get displayed to viewers who aren’t remotely interested in your application and aren’t likely to download it either. 

Combining your paid ad campaigns with content marketing can prep up your app for unlocking a hockey stick growth by reaching your target audience, establishing a brand identity, converting cold leads into warm ones that are more likely to convert and rewarding your marketing strategy by achieving app downloads. 

Unlike conventional paid marketing strategies, content marketing focuses on delivering value to the prospects, helps them address and solve their problems and converts the cold leads into warm leads. When people in search of a solution that your application offers come across the value-adding content being published by you, it not only creates brand authority and trustworthiness, but it also puts the leads right into your marketing funnel. 

While paid ads work great for mobile apps, using paid advertising in conjugation with a digital marketing strategy that gets users flowing right in is the secret ingredient companies need to reduce the customer acquisition costs of their mobile apps. 

Prior to launching a paid ad-campaign, you need to ensure you’re advertising on mobile networks alone – if you’re not, you’re simply wasting your money advertising on desktop browsers since PC users are not going to be able to download your application directly.

When creating paid advertising campaigns, social media channels such as Twitter and Facebook allow businesses to create their own app install ads that target the specific audience demographics based on user interests raising the chances of achieving app downloads.


Wrapping Up

An old business adage by Peter Drucker goes, “You can’t manage what you don’t measure”. Even then, many businesses often neglect to measure just how effective those fancy mobile applications truly are in actually attracting more customers that will engage with and purchase their products or services.

Amid the rising complications of multichannel associations with customers, nurturing overall business profitability through customer acquisition requires accurate as well as detailed cost models. Businesses need to audit their campaigns and loan-to-value ratio regularly to ensure they are on the right path. Also, retargeting potential platforms could enable them to drive a higher ROI for your business.

Knowing your company’s exact CAC figures is critical simply because you need to make sure that both you and your sales teams are generating sufficient income to cover the costs of running the business.