Customer acquisition cost is one of the biggest expenditures of businesses. This eats up on profitability, making the return on investment lower. Unfortunately, customer acquisition cost has been on the rise. Currently, most businesses spend over 56% of their budget on customer acquisition. Over the past four years, customer acquisition cost has increased by over 70% and it’s still on the rise. Even though the CAC of B2B businesses tend to be higher, both B2B and B2C businesses have experienced an increase in CAC. Despite technological innovation in the business space, customer acquisition cost remains constant. It uses some traditional methods in getting customers.

Customer Acquisition has been on the rise because of increase in competition. And also buyers are more informed and thus know what they want. This makes it harder for businesses to sell their products to customers. The changes in privacy rules have a big impact on the price of customer acquisition. The California Consumer Privacy Act (CCPA), for instance, was enacted in 2020 to protect privacy and consumer rights in the United States and GDPR in Europe. The CCPA has protected consumer databases by limiting the access marketers have and how they can use the data. There is also the Surveillance Advertising Act that has put a restriction on targeted advertising. These kinds of rules have changed the game of marketers making acquisition costs to be higher. 

What is a customer acquisition cost? 

Customer acquisition costs, CAC, is the total expenses a business incurs in acquiring a new customer. It entails marketing and sales costs over a certain period of time. These are costs such as salaries, ad spend, technical costs, overhead costs, etc for attracting leads and converting them to customers.

To know your CAC, you need to do a measurement to know your ROI and the effectiveness of your marketing and sales efforts. 

How do you calculate customer acquisition costs? 

To get CAC, you add marketing plus sales expenses divided by the number of customers acquired in a certain period. Most companies calculate their CAC in quarters but of course you can do it monthly or yearly. 

Although customer acquisition cost is on the rise, there are still many ways of reducing your costs. Having a lower CAC means the company is acquiring customers in an efficient way. One of the underrated ways of reducing customer acquisition is understanding your customers.

Ways of reducing customer acquisition. 

  1. Understanding customers

Most companies only know about their products and have an overview on who their dream customer is. Unfortunately, customers and their needs evolve with time with technology and market changes. Any company is, thus, obliged to keep studying the customers to know what they need. One of the easiest ways to understand customers is by understanding buyer personas. A buyer personas is a fictitious representation of your dream customer, their interests, their pain points and their preferences. Through understanding customers on a deeper level, connecting with them becomes a breeze.

Through creating a buyer persona, you are stepping into the customer’s shoes to understand what works for them and what doesn’t. A company can have a variety of buyer personas depending on the nature of business and what they deal with. Some companies can have up to twenty buyer personas. 

There are many underrated benefits of having a buyer persona. That includes:

The right targeting

It is through a buyer persona that one can do the right targeting. They can identify the target audience and devise a strategy and resource that resonates with that audience. Buyer personas shape the expectations of customers beliefs, personality traits and buying motivations. This helps sales and marketing be personal in interacting with customers. 

Personalization ensures the right communication, the right content and in their preferred channel. This ensures everything done aligns with the preference of the persona. 

Having the right buyer persona cohorts will give your marketing initiatives direction. It helps with the right messaging to build better relationships with customers and give their exact needs.

Reach customers on their preferred channels. 

Once your buyer persona is accurate, then you can know your target customers’ preferred channels.

According to research 75% of customers do not complete a purchase because of the wrong channel. Many businesses end up spending a lot of their budgets on the wrong channels. While this can be solved by understanding the preferred channel of your customer and reaching out to them through that channel this will make it simple and easier to complete. For customer to complete a charge a purchase without falling out 

Reduce customer churn. 

Most companies experience high churn rates because the customer loses interest over time. One way to ensure a customer does not lose interest in your product or service is by doing follow ups and updating buyer personas. As mentioned earlier, buyer personas change with time based on the market and the changing needs and preferences. 

By engaging with clients, you will be able to know what they need, what their preferences are, and what changes they need done. 

Research suggests that it costs seven times more to get a new customer than keep an existing one. That means retaining customers is much cheaper than acquiring new customers.

There are many ways you can engage customers to understand them and get their feedback. Technology such as AI has made it possible to have chat bots who can do real-time communication with clients and analyse their behaviours to know what they need.

Increased efficiency of marketing and sales

Buyer personas can help you increase efficiency, which will help you shorten the sales cycles and achieve goals in a shorter span of time. Marketing can be able to do efficient campaigns. Sales will be in a better position to overcome objections as they understand the customers pain points; hence they know likely objections they can face. 

2. Shortening the sales cycle.

When the sales cycle is long, it means you’re spending more money on acquiring customers. One of the easiest ways to shorten sales cycles is using marketing automation tools that can help you nurture your leads and move them quickly through the sales funnel. Through marketing automation tools, many companies have reported getting 25% more leads and better segmentation, which has speeded up the sales cycle.

3. Referrals. 

Many customers trust referrals from their networks when it comes to making a buying decision. That means word of mouth is still one of the most effective marketing methods. Referral marketing helps to lower client acquisition costs. Wharton Business Schools suggest that customers from referrals are $0.4- $5 more profitable than any other customers. The customer acquisition cost is also less comparatively. 

4. Retargeting / remarketing. 

This is an effective way of bringing back customers into the funnel. 

You can use this through ads, chat bots, and many other tools. Most companies are using AI to bring customers back to the funnel. For example they use bots to track how a customer interacted with the website and get all their details. In the scenario that the customer leaves the Chatbot will do a follow up and engage with them to nurture them to engage.

5. Increase average purchase value. 

This is one of the easiest ways to increase your profit and reduce your CAC. It increases the profitability by increasing your average order value. You’re increasing the price of your product or service, meaning you’re getting more money from it.

6. Conversion rate optimization

Your system should be easy such that it is simple to convert visitors to leads, and leads to customers. The site speed and user experience should be top notch as that will determine if a customer wants to interact with your site or not. In an era where people spend a lot of time on their mobile devices, it should be optimised for mobile use as well. 


Customer acquisition cost is one of the costs any business cannot ignore and this can be solved by fixing buyer personas. Buyer personas have a big impact on a business as they help you to understand your customer and map out their interests. This helps you with the right targeting, the right messaging and helps you to deliver what customers need. This results in returning customers and keeping the customers hooked. 

Sulma and Sulma are experts on customer understanding. They have a platform that helps companies understand their customers, unravel their different buyer personas using data and insights. They do not stop at that as they also deliver you sales qualified leads. This in turn leads to a lower customer acquisition cost and better customer experience. 

Do you want the perfect buyer persona and a lower customer acquisition cost?

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