Customer Acquisition

What is Customer Acquisition?

Customer acquisition is the process of attracting and onboarding new customers or clients for your business. B2B SaaS companies can leverage any combination of deep customer research, inbound and outbound marketing tactics, product experiences, and traditional sales approaches to win new customers.

The customer acquisition process maps directly onto the sales/marketing funnel. These processes are one and the same: the process of generating a new customer.

Customer acquisition can be modeled as a three-step process:

  1. Awareness – Before you can win over a potential customer, they need to know that you exist. The awareness stage is all about helping your future customers discover your business and getting them interested in the products and services that you provide.
  2. Consideration – After a potential customer becomes aware of your business, there may come a time where they view your products or services as a solution to a problem they’re experiencing. When this happens, they may start doing more research into your business and the solutions you provide. Your goal in the consideration stage is to help future customers understand the value you provide and what makes you stand out in the market.
  3. Conversion – In the conversion stage, your potential customer has researched your business, compared you with alternative solutions, and their purchasing intent is high. Your goal in the conversion stage is convincing the prospect to take action and become your customer.

With this process overview as a starting point, B2B SaaS companies have developed and implemented a variety of customer acquisition strategies, using many different channels and tactics to generate brand awareness, support the consideration process, and convert prospects into paying customers.

Customer acquisition can be spearheaded by a company’s sales team, its marketing team, by the product itself, or even by the customers. Marketers also use SaaS marketing metrics to measure and report on the success of customer acquisition efforts.

Why is Customer Acquisition Important?

Customer acquisition is fundamental to the core objective of any business: to maximize profits for its owners and shareholders.

Profit can be defined as:

Whether you’re a venture-backed growth company or a bootstrapped micro-SaaS start-up, you’ll only turn a profit if you can generate revenue by acquiring new customers and having them pay for your service.

Without customer acquisition, your business has no customers, no revenue, no profits, and eventually you have no business.

 

Customer Acquisition for the Win

Acquiring new customers is crucial for the long-term success of your business.

It brings in revenue that you can re-invest to keep your business in growth mode.

If you’re in a subscription-based revenue model, customer acquisition adds to your ARR and materially increases the value of your company.

It gives you the opportunity to delight a new customer and create an amazing customer success story and a new advocate for your brand.

Four Customer Acquisition Strategies for SaaS Businesses

B2B SaaS companies have successfully implemented a number of customer acquisition strategies. Each of these strategies follows the general framework of generating awareness, supporting the consideration process, and driving conversions – but the focus and tactics are slightly different.

 

Product-led Growth

Product-led growth is a customer acquisition strategy that emphasizes product usage and positive customer experiences. SaaS companies following a product-led strategy will often adopt a Freemium pricing model, broadening access to the free version of their product while charging for premium or enterprise features. SaaS companies like Slack and Dropbox grew exponentially by deploying a product-led growth strategy.

 

Sales-led Growth

Sales-led growth is a customer acquisition strategy where sales processes and teams play the most important role in driving revenue. SaaS companies following a sales-led strategy may focus on identifying important decision-makers in target companies, conducting outreach, generating sales-qualified leads (SQLs), and closing deals through an account executive.

While a product-led growth strategy tries to create positive product experiences for the customer, a sales-led strategy tries to engage the customer directly and sell them on the value of the product.

 

Marketing-led Growth

Marketing-led growth is a customer acquisition strategy where marketing teams leverage multiple channels (e.g. email, social media, paid advertisements, SEO) and tactics (e.g. blogs, white papers, guides and how-to articles, video content, podcasts, etc.) to support customers throughout the purchasing journey and scale their customer acquisition.

 

Customer-led Growth

Customer-led growth is an acquisition strategy that leverages deep customer insights and 1st-party data to identify valuable customers and create personalized, highly-targeted experiences that drive conversions.

Three Customer Acquisition Metrics You Should Know

B2B SaaS companies use metrics to measure and report on the success of their customer acquisition efforts. When it comes to acquiring new customers, there are three important metrics you should know:

 

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is a measurement of how much it costs your business to generate a new customer. The lower your CAC, the more efficient you are at acquiring new customers for your business.

 

Customer Lifetime Value

Customer Lifetime Value (LTV) is an estimate of the average revenue you’ll receive from a single customer throughout their entire customer journey. A customer is profitable when their LTV exceeds the customer acquisition cost.

 

LTV:CAC Ratio

B2B SaaS companies can measure the efficiency of their customer acquisition processes using LTV:CAC ratio, which is simply a ratio between your calculated CAC and estimated LTV.

 

An LTV:CAC of 5:1 means that you’re generating five dollars in revenue for every dollar you spend acquiring customers – you’re earning a healthy return on your marketing dollars.

An LTV:CAC of 1:1 means that you’re just breaking even, with every dollar of customer acquisition costs generating a dollar of revenue.

An LTV:CAC of less than 1:1 means that you’re losing money.

Customer Generation: The New SaaS Marketing

When it comes to LTV:CAC, higher isn’t always better.

In our experience, an LTV:CAC higher than about 3:1 means that you’re probably under-investing in the channel and could grow even faster by increasing your presence there.

At Directive, we target an LTV:CAC ratio of 3:1 when we’re executing customer acquisition campaigns. This ratio represents the “sweet spot” that allows us to scale advertising spend and aggressively capture market share for our B2B SaaS clients.

It’s all part of our Customer Generation methodology, a Customer-led approach created by Directive to drive revenue growth and success for the next generation of B2B SaaS companies.

Ready to learn more?

Book an intro call with our team, or Join Society and gain access to free advice and exclusive content from our SaaS marketing community.

https://directiveconsulting.com/join-society/

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