Customer Acquisition Cost Too High?

Cole, Thomas. View from Mount Holyoke, Northampton, Massachusetts, after a Thunderstorm - The Oxbow. 1836. Oil on canvas. Met. Museum of Art, New York.

Use Personalization To Reduce CAC In 2022

More businesses than ever will waste time and money on email marketing in 2022. These forgettable campaigns will take the forms of basic newsletters or steady drip campaigns that send static content at a predetermined rate. With such a high volume of low quality content flowing through inboxes, it’s going to be more difficult than ever for small businesses or medium-sized companies to rise above the background noise. Increasing the frequency of their emails will only make the problem worse. Even if marketers write the best content and deliver it at the perfect time to an engaged target audience, CAC is going to spike unless a different approach is taken. What is the solution?

Customer Acquisition Cost (CAC) is the total spent on marketing divided by new customer gain during the same period. This metric is essential to understand the profitability of marketing campaigns across all channels. To make better strategic decisions in 2022, companies should calculate CAC for all channels: Email, SMS, Organic SEO, Paid Search, Social Media, Paid Social, TV, Radio, Print, Display etc. For digital campaigns, CAC will provide more meaningful insight into cost-per-click KPIs for subscribers (marketing-qualified leads), prospects (sales-qualified leads), and buyers (conversions). Each buyer persona can also have extremely variable CACs. That’s not to say any one channel, segment, or persona is better, because omnichannel marketing strategies should leverage all opportunities to reach potential customers with a personalized message at the right time. However, understanding the relative costs and potential of each channel allows brands to allocate limited marketing budgets intelligently to maximize their customer base.

If you listen to NPR Morning Edition, you might have heard about a new sponsor called Klaviyo (pronounced KLAY-VEE-OH). The description sounds simple, “working to help businesses build genuine customer relationships through personalized email and SMS marketing.” In reality, Klaviyo is a complex Customer Relationship Management (CRM) database combined with an Email Service Provider and programmatic SMS Delivery Platform through the power of Artificial Intelligence (AI). Let’s unpack that.

CRM software like Klaviyo, Salesforce, or HubSpot tracks the behaviors, preferences, and contact details of anyone coming into contact with digital brand assets. CRMs integrate data from eCommerce, content management, social networking, advertising, mobile app, helpdesk, customer reviews, surveys, shipping/logistics, and user generated content into a centralized database. Sales teams, marketing staff, and business intelligence automations can then make sense of it all. Without a CRM it is impossible to foresee where each lead, prospect, or customer is within the sales funnel or segment them to receive personalized marketing messages. 

Once upon a time, you would need separate platforms to send email and texts based on customer data, but all of the main CRM providers now have email integrated to a greater or lesser degree. Each of the top CRMs has an area of expertise and Salesforce, HubSpot or another provider may be a good fit for different business models. For example, if your company provides B2B services and does not have a large in-house sales team or experienced marketing staff HubSpot is very user friendly. Salesforce specializes in large companies with commission structures, especially multinationals with huge numbers of sales staff. Klaviyo offers seamless integration to Shopify and other eCommerce software plus a powerful AI capable of predicting customer behavior. 

For companies using Shopify, WooCommerce, BigCommerce, Magento or other eCommerce software, Klaviyo’s integration is light-years ahead of other CRMs. Klaviyo tracks all of your contacts’ preferences, details, and historic behavior including purchases, page views, email opens, and clicks. This allows you to create actionable segments to A/B test emails and send 2-way SMS messages using any combination of data points. The Klaviyo AI can predict future behavior, like Customer Lifetime Value, Estimated Number Of Orders, and Average Time Between Orders. It can even guess a contact’s gender based on their name. Marketers will then build personalized user experiences called ‘flows’ that filter segments of contacts to trigger different messaging based on real and predicted behaviors. 

Creating an experience custom-tailored to your contacts’ individual preferences and behavior is the key to driving down CAC in 2022. When you deliver personalized brand experiences that respond to individual preferences in real time, you earn customers’ loyalty by listening instead of simply talking about your brand. It’s the difference between a recording versus a live concert reflecting the crowd’s energy. When your audience feels heard they respond as if connected to a tribal community that cares about their success. 

Personalized marketing messages can take many forms, these are just a few ideas to create singular brand experiences:

  • Only sending messages at a convenient time within each contact’s timezone
  • Sending via SMS to those who say they prefer text messages
  • Showing certain signup forms, flyouts or popups to specific contacts
  • Using dynamic placeholders to insert name, location, important dates, and spouse’s, kids’, or pet’s names
  • Displaying products they have previously shown interest in
  • Rewarding brand enthusiasts with VIP event invitations and early access to sales
  • Trying new ways to engage with 1-time customers
  • Sending event invitations to customers who live nearby
  • Leveraging a customer’s expected order date to send reminders
  • Replenishment emails to those who’ve shown interest in out-of-stock items
  • Sending birthday and anniversary messages, gifts, and promotions
  • Encouraging positive reviews after a product has been delivered
  • Sending satisfaction surveys and responding based on the answers
  • Having customer service respond proactively to complaints
  • Creating quizzes that sort contacts into buyer personas based on their answers
  • Displaying different images and/or messages to women and men

According to a survey from Accenture, 91% of consumers are more likely to shop with brands who recognize, remember, and provide relevant offers and recommendations1. More troubling is the stat from SmarterHQ that 47% of consumers check Amazon if the brand they’re shopping with doesn’t provide relevant product recommendations2. If your goal is to sell products direct-to-consumers, you’ll need to leverage CRM data to keep customers on your site. 

What about privacy? 

The beauty of CRM data is that it is given voluntarily to be used in marketing by brands customers trust, usually through submission forms alongside a clear consent statement. This level of personalization is not “creepy” like when Google, Facebook, or Amazon seem to know things they shouldn’t or listen to conversations without your knowledge. In contrast, more than 50% of consumers surveyed in 2018 were willing to share their data to create personalized experiences3 and 90% of U.S. customers found marketing personalization “very or somewhat appealing.”4 The key is appealing to the better angels of our nature, respecting the vulnerability inherent in sharing personal information, clearly asking for consent before using personal data to provide a better experience, and rewarding loyalty.

Personalized marketing is more accessible than ever before in 2022. Using tools like Klaviyo even small startups can listen to their users and provide relevant experiences. It demands creativity to craft better content, but the technology is available to everyone. High Customer Acquisition Costs should concern all marketers, since they are telling us the old ways of communicating are no longer effective. New frontiers, especially 2-way SMS coupled with programmatic email, provide measurably better results by listening and responding with respect to consumers’ specific needs and desires.