The average customer acquisition cost (CAC) for SaaS businesses ranges from $76 to $519 per customer. While the former is for SaaS companies in the retail space, the latter figure is for insurance SaaS businesses.
These figures demonstrate that acquiring customers comes at a hefty price. In fact, customer acquisition costs have increased by over 65% in the last few years.
So, it’s not hard to see that customer acquisition costs SaaS businesses a lot. Fortunately, there are a few ways to reduce these costs. Let’s discuss them in detail.
What is customer acquisition cost?
The CAC is the total amount of money a company spends on getting a new customer. A customer acquisition cost example is the money a company spends on marketing and advertising campaigns to attract new customers.
Ideally, you want your SaaS customer acquisition cost to be low to ensure sustainable growth.
What factors affect customer acquisition cost?
You can use a customer acquisition cost calculator to determine how much you spend to gain one customer. Some common factors that affect customer acquisition cost are:
- Money spent on marketing campaigns
- Money spent on advertising and social media strategies
- Sales staff salaries
- Money spent on customer service
- Software and technology used for acquiring customers
What are the strategies for customer acquisition?
The strategies you use for customer acquisition should be tailored to your business and its specific needs. Some of the most common customer acquisition strategies include:
- Paid advertising
- Mobile marketing
- Referral programs
- Content marketing
- Search engine optimization
- Affiliate marketing
If you’re looking for a cost-effective customer acquisition strategy, referral programs and affiliate marketing are good options. Meanwhile, social media customer acquisition cost is higher as you have to pay for every click.
Email marketing continues to be a popular customer acquisition strategy, as it’s more personal than other forms of digital advertising.
How to reduce SaaS customer acquisition costs in 5 steps
Every SaaS business wants to reduce its CAC to maximize profits. But how can you reduce the cost of customer acquisition? Here are a few steps to improving your customer acquisition and lowering costs.
1. Optimize your website for a pleasant user experience
Think of your website as a digital drive-thru for your business. When a potential customer finds your website, they want to find everything easily.
Issues like slow loading times, incompatibility with mobile devices, and poor UX will drive these potential buyers away. 89% of consumers will go to a competitor after experiencing a poor user experience on your website. Why force them to do so?
Instead, you should keep things simple on your website. Use white space to make everything accessible and clutter-free. It also helps to include accessibility features on your website for those with hearing or vision impairments.
Also, improve the loading speed on your website and make it mobile-friendly. Your copy should also be actionable, to the point, and easy to understand.
A pleasant user experience translates to higher customer retention. For example, an e-commerce site that loads in a second has a 2.5x higher conversion rate than a website that takes five seconds to load.
In this way, you get people to take the desired action while giving them a reason to return to your website. Higher customer retention means you don’t have to constantly spend money on acquiring new customers, thus reducing customer acquisition costs.
2. Automate certain processes
The more people you hire in sales and marketing, the more money you’ll have to pay them. Instead, if you automate a few processes, you can save these additional costs.
You can reduce human involvement in the customer acquisition process by automating the following tasks:
- Email automation: Modern email automation software helps you create automated email sequences. It ensures your customers receive the right message at the right time.
- Marketing enablement: You can automate many processes in marketing enablement by syncing your data and creating custom workflows in relevant software.
- Social media posting: Social media tools let you create a content calendar for your campaign. You can also schedule posts and use existing templates to create eye-catching visuals.
Automation will result in a low customer acquisition cost, fewer human errors, and smooth operations.
3. Work with affiliates
Working with affiliate marketers is a great way to increase your customer acquisition rate while reducing CAC. When you use paid advertising, you’ll have to pay for visits and clicks on your ads, even if there’s no conversion.
On the other hand, with affiliates, you only pay after conversions. Also, the affiliates will work as your sales reps, eliminating the need for hiring individual ones. So, you cut costs in two ways.
4. Use A/B testing for landing pages
The landing pages on your website, especially the plans and pricing pages, are important in terms of acquiring customers. A/B testing helps you see which version of your landing page brings in more conversions.
You can make different versions of these pages and test them against each other to see their effectiveness. Here are some ways to design and structure your pages for the best results:
- Include social proof to show your credibility to potential customers.
- FOMO (fear of missing out) works wonders. Show limited-time offers on your pricing page to encourage visitors to take action.
- Use clear and concise copy. Do not include unnecessary details or information a customer wouldn’t need.
- Include an actionable and prominent call to action so it’s clear to customers what they should do next.
5. Retarget your customers
Sometimes, customers need a nudge to take action and convert. That’s why retargeting campaigns work so well. You can use them to engage visitors who have already visited your website.
The pixel sort of acts like a cookie, notifying retargeting platforms to show specific ads (based on the pages they visited on your site) related to your products or service to this visitor. These ads serve as a reminder to the visitor about your business and encourage them to take action.
Retargeting lowers acquisition costs because you’re trying to appeal to people who’ve already interacted with your business rather than starting with fresh prospects.
It also improves conversions by re-engaging with customers who may have forgotten about you or haven’t yet taken the desired action.
Acquire your customers for less
Lowering customer acquisition costs should be a priority for all SaaS companies. It all begins with retargeting your customers, curating a good customer acquisition strategy, and optimizing your website. On top of that, the right content and marketing campaigns can help you acquire customers for less.
You can also automate several marketing, sales, and social media tasks. Similarly, affiliates can be instrumental in bringing in new customers without making the process too pricey.
SaaS startups spend 92% of their first-year revenue on acquiring new customers. With such high costs, you can only expect your business to last if you have a revenue-generation platform. At VeryCreatives, we can help you do that.
Our team of designers and developers works with you to bring your digital vision to life. With our quick four-step process, you can create a digital product that makes your customer acquisition spending worth it. Book a call with us to learn more.