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Here’s Why SEO is Important in Reducing Customer Acquisition Costs

Gaining customers consistently is a priority for any big or small business to grow and be successful. However, acquiring these customers can be a costly affair. There are a lot of elements that go into customer acquisitions, and they typically come with a cost. Today we’re going to look at all the variables and explore ways to reduce customer acquisition costs using - none other than, you guessed it - Seach Engine Optimization!

Firstly, what is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost is an average calculation of how much money a company spends to gain a single customer. CAC is a vital marketing metric that helps analysts/CEOs justify whether a company’s marketing/sales efforts have effectively acquired customers based on the per head cost.
This metric is calculated by dividing customer acquisition expenses by the number of customers gained. For example, if you got 11 new customers from a $5,000 marketing/sales period, the CAC would be: 5000/11 = $454.54.
Knowing this amount helps simplify the decision process about future marketing/ sales campaigns. Getting customers costs money; therefore, it’s essential to implement effective, low-cost techniques to attract more customers and reduce CAC.

Is it Important to Reduce Customer Acquisition Costs?

1. Viable Business Model

The CAC is one of the many factors determining whether your company’s current business model is viable and can yield consistent profits. Reducing your CAC can be beneficial to grow or scale your business. Therefore, knowing how much your company spends to get more customers can give you a clear insight into whether you need to change your marketing and sales goals to make them more effective.
The last thing you want is to be overpaying to acquire customers when you can implement cost-effective methods to attract them instead.

2. Impacts Future Campaigns

When it comes to marketing/sales budgets and analytics, it’s all about making the smartest decision for your company. Knowing your CAC will indicate whether or not your sales and marketing teams have to restructure their campaigns to use the budget they have to entice customers better.
Some adverts or campaigns may look like they’ve yielded the same number of clients. However, when the CAC is calculated for each ad, the results can show which ad has the lower CAC, therefore making it the more effective campaign.
Creating more campaigns that yield results and are cost-effective can help replicate the strategy for new campaigns. This insight can streamline ads/campaigns in the future based on the model/channel that performs the best.

3. Customer Lifetime Value is also Important

Not all costs are bad; when reducing the customer acquisition costs, it’s essential to also factor in the customer lifetime value (CLV), which is - just how much a customer purchased during that period.
Let’s say there are two ads, both with a CAC of $5, and both gained five customers.
AD 1 targets kids ages 4-5, and each of the five new customers bought one item.
However, Ad 2 targets a different customer segment, kids ages 6 - 9, and the five customers bought more than one item.
Therefore, even though the CAC was the same, the CLV plays a factor in which Ad was more effective in terms of sales. Reducing the CAC is important but should be weighed against the CLV so that CEOs can make a more informed decision for future marketing and sales plans.

4. More budget for other departments

Every company has a budget for its various departments. Typically, marketing and sales get a sizeable chunk; optimizing the spending in these departments can stretch the budget to other departments. One way to do this is to reduce customer acquisition costs.
Opting for cheaper yet effective digital methods using SEO to gain clients can reduce this cost and impact a company's overall revenue. It is in a company's best interest to have a relatively low CAC without affecting CLV or other metrics. It's a constant game of balance, and that's where SEO plays a big part. SEO can significantly impact the way a company acquires customers.

Tips to Reduce Customer Acquisition Costs Using SEO

1. Improve Website Ranking

No matter who your customers are, they all use search engines to look for information, find listings, ask questions, get the news, or for entertainment. So, if you want to get more customers, you have to be visible to them. That's why your website must be optimized. A strong SEO strategy will help your website rank on SERPs, leading to more fulfilled search queries and more traffic to your website - The more traffic you have, the more opportunities to convert them into customers.
You can use SEO tools such as SEMrush, Ahref, Google Analytics, etc - all of which have free and paid subscriptions that won't majorly impact your CAC.

2. Optimize Content/Campaigns

Your company might be known for its great content. However, it needs to reach audiences around the world. Instead of only pumping money into marketing efforts that will drive your CAC up, a more cost-effective way is to optimize existing content.
Hiring an SEO team to conduct on-page and technical SEO can significantly increase its reach and expand it into untapped demographics.
Additionally, older campaigns can be repurposed and optimized to continue to show up in search results. That's the brilliance of SEO. It has incredible long-term potential. Even content from years ago can attract traffic if it fulfills search queries by properly indexing by search engines. Therefore, reduce CAC by optimizing your content.
Yellow pages may be a thing of the past, but it has an updated digital counterpart known as Google My Business. Having a listing on this platform gives your company significant visibility to a variety of demographics. A listing on this platform will help your business show up in:

  • Local searches,
  • Product/services searches,
  • Niche-specific searches, and
  • N-brand searches

Therefore, a listing on Google My Business redirects potential customers to your website and gives you more opportunities to convert leads into customers. The best part of this platform is that you can create your listing for free, so it will not add any extra expenditure to your current CAC, but it will help gain more visibility and more traffic to your website.

4. Conduct Technical SEO

SEO isn't about adding keyword stuffing and finding the best way to market your content organically. Another very effective method to widen your reach and get more traffic is to make sure the technical aspects of your website are working so that crawlers can index it.
Factors such as broken links, page speed, backlinks, improper robot txt, title tags, site maps, etc., must be addressed and corrected so that your website is indexed.
The more pages of your website that get indexed, the more it will show up in search results. Conducting technical SEO will grow your organic reach and help convert those organic leads into customers.

5. Create Valuable Digital Content

There is great value in creating content that fulfills your client's search intent and keyword research. Knowing who your customers are and what they are searching for online will help your content team create blogs, ads, videos, etc., that can be published regularly and target your demographic.
Besides becoming an authority in your niche thanks to the valuable content you post, it can also be optimized to increase your traffic. Keywords, meta descriptions, captivating images, viral videos help grow your reach organically. Therefore, don't just focus on big-picture campaigns; investing inconsistent content curation that's SEO-friendly will help you gain more customers and rank your website on search engines.
Unlike major campaigns, creating blogs, articles, etc., is budget-friendly and can be done by in-house content teams.

6. Create an Affiliate Partner Program

Another great way to reduce CAC is to partner up with influencers or platforms in your niche and offer an affiliate program. These influences can engage with their demographic and entice them to try your product/service. Since you only pay affiliates a percentage-based commission after purchase, this activity reduces your CAC while expanding your reach to a different/target demographic.
The right affiliate partnerships can boost sales without any up-front costs, and that's a great side-benefit. Research finding the best influencers on social media and other platforms who resonate with your primary demographic, as this will widen your reach. Plus, partnering with a different influencer can help you expand into new niches that were previously untapped.

7. Explore Various Channels

Many companies tend to stick to the familiar acquisition channels, such as Facebook and Google ads. These channels, over time, have become expensive and overly saturated. Therefore, it's logical to explore different channels that are cost-effective and convert leads into customers. Blogging, email marketing, PPC, website SEO are all great digital channels to explore.
Plus, since the above relies on SEO and content marketing methods, your CAC will reduce, and that's because many SEO automation tools are free and content writers/SEO specialists are available at varying price points depending on their experience.

FAQs About Customer Acquisition Cost & SEO

Q1: How Do I Calculate Customer Acquisitions Costs while also factoring in my SEO efforts?

Answer: The formula for CAC is:
Customer acquisition cost = Total Spend (marketing/sales cost) / Total number of new customers.
Under Total Spend, you typically include salaries, execution costs, printing costs, event costs, PPC, etc. Since SEO is part of inbound marketing, you should add these expenses to the Total Spend when factoring SEO into this formula.
If you spent money on SEO tools, hiring an agency, hiring content writers, etc. All these can be attributed to the marketing costs. Adding these expenditures to the equation will give you the average cost of acquiring a customer while also factoring in your SEO efforts.

Q2: How much should I expect to shell out on Customer Acquisition Cost be for my start-up?

Answer: Every industry has a different CAC, so determining one for a start-up is primarily based on who you are as a company and which industry your company fits under. Calculating your CAC is an important metric because it determines your business model, growth, marketing budget, and whether or not your marketing/sales campaigns are effective.
Factor in different channels when calculating your CAC so that you get a better idea of your actual costs. That said, instead of basing your CAC on market or competitor averages, use it to determine whether the efforts and budget spent are effective for you. This insight can further help you decide whether the CAC can be reduced while maintaining or increasing the client yield.

Q3: What is the most effective way to reduce my customer acquisitions costs?

Answer: Many factors contribute to your customer acquisition costs; therefore, knowing more about it will give you insight into where you are overspending and performing well. However, listed below are some of the most effective ways to reduce your CAC:

  • Affiliate Partnership Programs
  • Shorten the sales cycle
  • Focus on target audiences
  • Improve retention rate
  • Diversify channels
  • Invest in Content marketing
  • Focus on implementing an SEO strategy to get more customers

Start with these suggestions, and you will see a reduction in your CAC over time.

Q4: What is the Customer Acquisition Cost for an e-commerce business in 2021?

Answer: According to a report by Chatter Buzz Media, the average CAC for an e-commerce site using Google Paid Search campaigns as its channel is $45.27. It's important to note that this rate is based on just one channel. It isn't easy to give an average for an overall CAC because different e-commerce sites use different channels.
Some might depend on email marketing and Facebook ads; others might use Google ads, telemarketing, and blogs. Therefore, if you want to know the best CAC for your company, compare it to other companies that are using similar channels, have a similar demographic, and sell the same product/service.

To wrap up

Customer Acquisition Costs need a perspective change. As we've seen through the details mentioned in this article, it's important to understand and know your CAC. A low CAC doesn't always give you an accurate picture of how your business is doing. But a company's revenue is vital for its growth, so having low customer acquisitions costs is preferred.
Keeping that in mind, when you think about CAC as a whole, a company should view it from whether the cost incurred is effective and if it were reduced, would it still yield the same results. It is in a company's best interest to have a relatively low CAC without it affecting CLV or revenue.
When it comes to CAC, it's a constant game of balance, and with the world shifting more and more online, the advancement of SEO and search engine algorithms, the way a company acquires customers will become more cost-effective compared to past traditional marketing and sales methods.
We hope you enjoyed this article and got some valuable insights into CAC. Bookmark this page and come back for more content just like this!