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How Partnerships Can Reduce Customer Acquisition Costs

October 3, 2022

If you're like most other businesses right now you're wondering how to reduce your customer acquisition costs and improve the ROI of your marketing campaigns.

It's no secret that advertising costs on most digital ad platforms have skyrocketed and returns have plummeted. Acquiring customers has gotten harder, marketing campaigns more complicated and using the same old marketing strategies you've used up until now are not going to improve the situation for you.

Next year things will only get harder when Google blocks third-party tracking cookies.

The landscape is changing rapidly

Digital advertising and pay per click campaigns have been the primary marketing channel for most brands for more than two decades now, ever since google ads launched back in October 2000, and take up a large proportion of a brands marketing dollars.

The introduction of online tracking and automated split testing made traditional advertising campaigns seem outdated almost overnight.

What many people didn't notice at first was that ad spend continued to rise as did the potential customers acquisition cost. Marketing efforts that previously delivered a steady flow of low cost leads from a well defined target audience were slowly starting to blow out marketing expenses and budgets.

On top of that organic social media campaigns are no longer gaining much organic reach as the social media platforms adjusted their algorithms to drive brands to spend more on ads to reach their potential customer.

But what is really going to shake things up is the impending blocking of third party tracking cookies by Google on Chrome.  Google originally announced this back in June 2021 but have since delayed this twice because they know how disruptive this is going to be for the digital advertising industry.

Definition of customer acquisition cost

The definition of customer acquisition cost is pretty straight forward.  It's the total amount spent on acquiring customers divided by the number of new customers.

Sounds simple, right?  Let's break it down a little more.

All industries aren't created equal.  Ecommerce customer acquisition cost for fast moving consumer goods would calculate the customer acquisition cost based on the costs spent during the month.  Makes sense.  Amount spent on acquiring customers during the month divided by the number of new customers acquired in the month.

What happens when the sales cycle is a little longer, like in real estate, for example.  Someone purchasing a new house might complete their buyers journey over the course of a few months.

How are the costs calculated?

This is where people can make a lot of the wrong assumptions and people sometimes talk about total customer acquisition cost.

To calculate your customer acquisition costs correctly you need to have a look at all of the expenses that go into acquiring customers all the way from planning, to initial awareness, when they land on your landing page and enter your sales funnel and the costs involved in each stage of the sales funnel.

You need to factor in all the expenses including ad spend, cost of building the landing pages as well as hosting them. The cost of the customer relationship management system, the marketing team cost, as well as the costs of other team members that may be involved for only a period of time.  Don't forget to include a percentage of the cost of the tools these other team members used.

So how do we reduce customer acquisition cost?

Luckily there are a number of great alternatives for driving customer acquisition that will also reduce customer acquisition cost.

Here are 9 opportunities to do so:

  1. Sell more to existing customers and thereby increase customer lifetime value.  An existing customer already trusts you and is therefore much easier to convert.
  2. Improve your customer targeting.  By honing in on promoting your brand or offer to the right customers you'll have a higher chance of converting a lead to a paying customer.
  3. Focus on SEO as one of your main marketing channels.  SEO is a great channel for finding new customers and reducing customer acquisition cost.  It may take a while to get it going at first but by targeting the right keywords you can be found at the right time in a customer's buying process which can convert them from a lead into a paying customer very quickly.
  4. Implement a referral program. A referral program can have a huge impact on reducing customer acquisition costs, especially when you happy repeat customers that will proudly refer your brand to people they know.  A good referral program can also increase brand loyalty in the referrer.
  5. A customer loyalty program is a great tool to partner with a referral program.  The two can work together to improve your customer retention, up your customer lifetime value as well as bring new customers to the party. If you're thinking about a customer loyalty program you don't need to build it in-house you can use tools like Pabloo.
  6. Email marketing is a powerful tool to help you convert all those leads you acquired through all the other methods into paying customers.  A good marketing automation tool doesn't just keeps potential customers warm, it can also help you send a message at exactly the right time and should be a key part of your digital marketing strategy.
  7. Influencer marketing, although facing some headwinds as a channel itself can be useful when you select the right influencers and pay them on success as opposed to paying them for the post.
  8. Social media marketing may have lost a lot of its organic reach as platforms try and push you towards paid ads on their platform, but, it's still a useful complement on your hunt for more customers. With powerful social media management tools like Socialbee you can increase your efficiency with content distribution to keep customer acquisition cost low.
  9. Partnership marketing is one of the highest ROI marketing strategies available because not only does it boost sales in its own right, it can also be a powerful multiplier of your other strategies.  It can multiply the reach and outcomes of social media campaigns, your content marketing efforts, your event marketing, your customer loyalty programs and your overall marketing spend.

How leveraging partnerships dramatically lowers customer acquisition costs

As mentioned above, partnerships can reduce customer acquisition costs both in its own right and also as a multiplier of your other marketing activities.

How partnership marketing lowers acquisition cost in it's own right

There are a lot of ways to think about partnerships and there are a number of different types.  Here are some ways you can acquire more customers below normal advertising costs.

  1. Integration partnerships:  this is where you integrate your product with another product.  Quite common, but not limited to, SaaS products.  Integration partnerships usually add value to both your product and the product that you're integrating with.  Because you're adding value the other brand will likely promote you.  They might list your product as one of their integrations which is like free advertising after you factor the costs of the integration. Large SaaS companies like Shopify also have a marketplace where your target customers go to find enhancements to their shopify experience.
  2. Event partnerships: this is where you co-host an event with other brands.  This can be a particularly powerful and high ROI type of partnership.  Using a webinar as an example (although in-person events have similar properties), you get to share (lower) the costs of hosting the webinar plus you get brand exposure on the invitations the other brands send out and you're likely to draw a larger audience for the webinar itself.
  3. Cross promotion: this can often be one of the lowest cost marketing channels you can execute on.  As long as your target audience is aligned you can simply promote each others brands on your email lists

How partnership marketing becomes a multiplier

Think of everything you can execute on your own and then think of doing the same things with multiple brands.

  • You could run a social media give away on your own, or you could run the same thing with multiple brands.  Each brand contributes to the prize, thereby multiplying the value of the prize and each brand participates in the promotion thereby multiplying the reach.
  • You can create a video for content on your own or you could do it with a couple of partner brands.  Each contributes to the cost thereby multiplying the budget and contributes to the creativity and distribution, again, acting as a multiplier.

As you think about it more you'll be able to see how integrating one or more partners into your marketing campaigns can add reach, creativity, reduce costs and significantly multiply the ROI.

What is Intribe? 

Intribe helps brands partner up to enjoy collaborative partnership marketing opportunities. Our clients tell us this delivers 10x the conversions of traditional advertising channels. 

We are currently running an early bird discount of 75% off our normal prices.

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