Have you ever thought that you need to minimize your customer acquisition cost (CAC)? If the answer is no, believe me, you need to think about it. Because, in the end, you want to make revenue from your mobile app and reducing CAC is the essential way to boost your revenues. But do we really know what CAC is and how to minimize it? Let’s discover them!
What is CAC
CAC generally represents the costs that are used in the process of acquiring a user. Reducing this cost is an important issue for any app owner who wants to survive and continue generating revenues.
In order to reduce CAC, first, you need to be able to calculate it. Then, you can step forward to define your CAC reducing strategy accordingly. Take a look at how to calculate it.
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How to Calculate CAC
CAC is basically the average cost that you spend in a time period for a new acquired user. The “primitive” format of this formula is like this:
But if we dig deeper, total cost includes all marketing budgets, the salary of your sales team and any other outreach or work you’re doing to acquire new users.
Let’s give an example. As an app owner, if you spend $500 in a given month to generate 100 new users: Your CAC is $5.
How to Reduce CAC
Actually, there are countless of strategies you can implement to lower your customer acquisition cost. But we’re going to give you the most important ways to reduce CAC.
1. Focus on Proper Users for You
If you define your target better, you win. It is that simple. All you need to do is to define your target as soon as possible. Then, create a buyer persona that matches your target. Buyer persona is simply a model of your ideal, perfect customer. Once you’ve done this, shape all your marketing efforts around this persona.
Retargeting
Retargeting is the further phase of the targeting process. Think about the app user that visits your website but doesn’t complete the action that you want from him/her. Retargeting stands for this kind of situations. You shouldn’t underestimate the possibility of a visitor to become your loyal user.
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2. Boost Your Conversion Rate
As an app owner, you might spend money to acquire users and drive more traffic. But think about it, how many of them show up with the actual action (install, purchase, sign up etc.) that you want? If you don’t know, here’s the good news! You don’t need to calculate it manually, just let the conversion rate answers your question. Because it is the percentage of users who take the desired action. There are multiple ways to increase your conversation rate. So, keep your eye on conversion rate and boost your revenue.
At this stage, The Raygun – software intelligence platform – would be your best assistant. You can explore poor user experiences due to slow page loads and network calls thanks to real user monitoring platform. You can see every user of your app and issue your users encountered. By updating your app in the direction of the Raygun, you can take a step to boost your conversion rate.
3. Pay Attention to Customer Retention
If you focus on acquiring users, you need to pay attention to customer retention metric as well. Customer retention is simply the metric that is used to count customers and track customer activities. That’s the point; acquiring a new user is much more expensive than keeping existing one. And tracking customer retention metric rate is important to keep users that you already have. To increase your retention rate, you need to build an attractive app to retain your customers. Be sure that you provide a good experience for your users.
With the help of customer retention practices, you can open a new door for your users to spread word of mouth, leave good comments on your app’s review section and build a community around your app. These are the best results for you to be heard by your audience and moreover; they’re beneficial for you to lower your CAC.
4. Tide Over Customer Churn Nightmare
Customer churn is like the dark side of Star Wars, Saruman of Lord of the Rings! Because it is the metric that shows you the percentage of how many users uninstall your app in a period of time. In other words, churn rate equals the formula of “1 – retention rate”.
So, it is not really hard to think that the higher customer churn rate means the higher CAC. It is the result of the fact that you lose your users and every single user that you lose increases your costs. For this reason, you need to track your churn rates and take action accordingly.
5. Turn Your Marketing Efforts into Automation
Marketing automation grows your business in various subjects like lead generation or email.
With the help of automation, you can speed up a process that requires manual efforts. So, we can say that if you use marketing automation right; it can be huge time and cost saver.
Companies that go automate see an increase in revenue in six to nine months. As you guess, increased revenue means lower CAC. You can see the ModCloth example in here and discover how they used automation to lower CAC by 14%.
6. Keep in Mind the Pareto Principle
First, let’s talk about what the Pareto Principle is for those who haven’t been heard of it so far. There was an Italian economist named “Pareto” who was the owner of Pareto Rule and it theorizes that 20% of your efforts produce 80% of your results.
Of course, there is not certain ratio like 80-20 for everything. It’s important to get the core idea. Let’s say you are an app owner trying to reach your goal by creating marketing strategies. In this case, 20% of your users will deliver 80% of your goal like in-app purchase. You should make an analysis with this principle, find the most profitable 20% and focus on acquiring this type of customer.
7. Use the Benefits of Creating a Content
Maybe you’ve heard of that quote: “Content is king!” As an organic marketing effort, content marketing simply allows you to generate leads without spending money.
All you need to do is building content which includes long-tail keywords. By the way, you need to define your keywords based-on your buyer personas. This effort can help you to boost your organic traffic over time without any extra spend. And organic traffic means more brand awareness.
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8. Define & Show Your USP
Unique Selling Proposition, USP in short, actually explains why your mobile app stands for. If you launch your app without clarifying your uniqueness, then your product will be undifferentiated and unattractive to potential users. Your USP is the single reason why and how your user is better than the competition’s, and also precious asset to motivate your users.
Here’s a step by step guide to implement USP strategy.
Final Thoughts
CAC is a necessary metric for every app owner. The key point is that you need to acquire users with most efficient and cheapest way. In other words; you need to do that with lowest CAC. If you want to boost your mobile app without going bankruptcy, you need to track your costs per user and manage your marketing strategies accordingly.