Every entrepreneur has to find a sustainable way to acquire customers if they want to stay in business.
Today we will discuss the key customer acquisition metrics, share the best way to acquire customers online, and explain how to outspend your rivals on customer acquisition and gain a competitive edge.
Ready to take your business to the next level?
- What You Need To Understand About Customer Acquisition
- Best Sales Funnels For Customer Acquisition
- Convert Email Subscribers Into Paying Customers With This Welcome Sequence
- Maximize Customer Lifetime Value (CLV) With the Value Ladder Sales Funnel
- Build Your First Sales Funnel in Just Five Days!
What You Need To Understand About Customer Acquisition
Let’s start with the basics of customer acquisition.
Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) is the most important metric that you need to pay attention to.
It shows how much money on average it costs for you to acquire a new customer.
It’s calculated using this formula:
Customer Acquisition Cost = Cost of Marketing + Cost of Sales / The Number of New Customers Acquired
If you don’t know what your CAC is, you need to calculate it ASAP because without it you’ll be stumbling in the dark.
Moreover, if you don’t know your numbers, you can’t be sure that the math works… And you need it to work if you want to build a sustainable business!
Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is another important metric that you need to pay attention to. Why?
Because your CLV determines how much you can spend on customer acquisition: your CAC can’t exceed your CLV!
CLV shows how much revenue on average a single customer brings in over their entire lifetime as a customer.
There are several ways to calculate it depending on your business model but the simplest one is this:
Customer Lifetime Value = Average Annual Revenue Per Customer x Average Length of a Customer Relationship in Years
Here’s another formula:
Customer Lifetime Value = Average Order Value x Average Number of Purchases Per Year Per Customer x Average Length of a Customer Relationship In Years
And here’s a simple CLV formula for SaaS businesses:
CLV = Average Revenue Per Account (ARPA) / Revenue Churn Rate %
There’s also an advanced CLV formula for SaaS businesses:
CLV = Average Revenue Per Account (ARPA) x Gross Margin %/ Revenue Churn Rate %
As you can see, calculating CLV is pretty straightforward for businesses that are built around one-time payments (e.g. ecommerce stores).
It gets more complicated if your business is built around recurring revenue (e.g. SaaS, membership sites, newsletter subscriptions, etc.).
And it’s even more tricky if you are dealing with both one-off payments and recurring revenue.
However, calculating your CLV is extremely important, so you can’t afford to be intimidated by complexity.
Again, you need to know your numbers in order to make the math work, so take the time to calculate your CLV!
“Whoever Can Spend the Most to Acquire a Customer Wins“
Our co-founder Russell Brunson often quotes Dan Kennedy:
“Whoever can spend the most to acquire a customer wins.”
He recently had an opportunity to talk to Kennedy and asked him to elaborate on this idea.
Kennedy explained that nothing can overcome bad economics. As we have already mentioned twice in this article, you need to make the math work!
The reason why whoever can spend the most to acquire a customer wins is that it allows them to buy speed, scale, and sustainability.
Moreover, being aggressive about customer acquisition also tends to intimidate competitors, especially if they can’t keep up with you.
That’s why, as counterintuitive as it may sound, we encourage entrepreneurs to spend more on customer acquisition, not less.
Stop obsessing about reducing your CAC and start obsessing about increasing your CLV so that you could then increase your CAC.
We are going to share how to maximize your CLV later in this article!
Don’t Make This Customer Acquisition Mistake!
We would argue that the most common customer acquisition mistake that entrepreneurs make is driving traffic directly to their sales pages or their websites.
The problem with this is that it’s the online equivalent of walking up to someone and being like “Yo, here’s my product, now buy it”.
They don’t know you. They don’t trust you. They haven’t had the time to do their research. So why would you expect them to buy from you??
This becomes incredibly obvious when you consider your own buying behavior. When was the last time you saw an ad for some random product, clicked through to its sales page, and made the purchase then and there?
If you are like most consumers, you probably buy primarily from people and companies that you are already familiar with and have come to trust.
So the question is how can you build trust with potential customers before pitching them your products or services?
This is where sales funnels come in…
Best Sales Funnels For Customer Acquisition
A sales funnel is a system designed to convert visitors into leads, leads into customers, and customers into repeat customers.
The main idea is this:
Instead of driving traffic directly to your website or your sales page, you drive it to the first page of your sales funnel where you ask for the potential customer’s email address.
Then, once you have their email address, you use email marketing to build trust and pitch your products and services!
Here are three proven sales funnels that you can use to acquire customers:
#1 The Squeeze Page Funnel
The squeeze page funnel is the most popular funnel out there.
It looks like this:
Page 1: A squeeze page.
Page 2: A thank you page.
Squeeze page funnels are super easy to build and can work well for any type of business!
Squeeze Page Funnel Case Study
Rob Cuesta owns a publishing company that serves business professionals.
He tried to get leads by attending various networking events but he would come home frustrated without much to show for it.
In fact, he would often feel that he had wasted time and money but didn’t get a lot of leads.
Eventually, Rob got so tired of chasing down leads that he started to look for ways to automate the process.
That’s when he decided to give ClickFunnels a try and created a squeeze page funnel using an ebook as his lead magnet.
Here’s how it worked:
- The potential customer would download a free ebook called “16 Ways To Grow Your Business With a Book”.
- On the thank you page they would be invited to a free webinar called “Your Book Is Your Brand” that provided additional video training.
- After watching the webinar, they would be invited to schedule a free 30-minute strategy call with Rob.
What were the results?
Rob landed so many new clients that he had to hire additional writers and designers to keep up with the workload!
Build a Squeeze Page Funnel With ClickFunnels 2.0!
ClickFunnels 2.0 includes a squeeze page funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.
#2 The Survey Funnel
The survey funnel allows you to direct people to different sales funnels from a single starting point.
It looks like this:
Page 1: A survey.
Page 2: A squeeze page based on the survey results.
Page 3: A thank you page based on the survey results.
The survey funnel is a great solution for businesses that serve several distinct customer segments because it allows you to easily tailor your sales messaging to each segment.
It can also work really well for service businesses in industries where using a lead magnet may not make sense.
In that case, you can use a variation of the survey funnel known as the quote funnel to qualify leads, provide them with quotes, and schedule free consultations.
Quote Funnel Case Study
Logan Brown works at the Universal Waste Disposal Company.
Before discovering ClickFunnels, this company wasn’t generating any leads online, literally zero.
But then one day, Logan’s boss saw an episode of “The Profit” in which Russell explained how sales funnels can be used to grow any kind of business.
So the boss went to Logan and said:
“Logan, we need a funnel. Here’s ClickFunnels. I think you can do this.”
Logan learned about various types of sales funnels, decided that a quote funnel would be the best fit and built it with our software.
Here’s how the first page of that funnel looked like:
After filling out the survey, the potential customer would be shown a pop-up asking for their contact information:
And then they would be taken to this thank you page:
Then the company would reach out to the potential customer and ask them what would be a good time to call them. Simple, right?
Now the Universal Waste Disposal Company averages 4-7 online submissions per week. This might not sound that impressive…
Until you realize that in that industry each customer is worth thousands of dollars. In 2017, the company generated $100,000+ in new revenue from these online leads!
Build a Survey Funnel With ClickFunnels 2.0!
ClickFunnels 2.0 includes a survey funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.
#3 The Webinar Funnel
The webinar funnel is a funnel where you use a webinar as your lead magnet.
It looks like this:
Page 1: A webinar registration page.
Page 2: A thank you page.
Page 3: A webinar page.
You can either end the webinar by encouraging the attendees to book a free consultation or by pitching your product or service and directing them to its sales page.
Webinar funnels can work well for any type of business!
Webinar Funnel Case Study
Derreck Smallwood used an automated webinar funnel to sell his marketing service subscription.
Here’s how it looked like:
- The potential customer would register for the webinar.
- They would be taken to the webinar page to watch a pre-recorded presentation.
- They would then be shown an order form for Derreck’s service.
- Finally, they would be offered a special, one-time upsell.
What were the results?
Derreck generated over $130,000 in revenue!
Build a Webinar Funnel With ClickFunnels 2.0!
ClickFunnels 2.0 includes a webinar funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.
Convert Email Subscribers Into Paying Customers With This Welcome Sequence
Okay, so now you know how to get leads, but how can you convert them into paying customers?
We don’t recommend hitting the potential subscriber with a sales pitch the moment you get their email address. You haven’t built enough trust yet!
Send them this six-email welcome sequence instead:
- Email #1: Who Are You? Introduce yourself to the new subscriber.
- Email #2: Where Did You Come From? Share your origin story. How did you come to do what you do now?
- Email #3: What Do You Do? Explain in more detail what it is that you do.
- Email #4: How Did You Gain This Expertise? Explain what makes you qualified to do what you do. Share relevant experience, credentials, and accomplishments.
- Email #5: Who Do You Do This For? Explain who are your dream customers + share a case study on how you helped such a person get the results that they wanted.
- Email #6: How Can You Do It For Me? Either offer a free 30-minute consultation and then close the sale during that call or pitch your product and service and provide a link to its sales page.
Send one email per day so that the entire sequence would take six days to complete.
Maximize Customer Lifetime Value (CLV) With the Value Ladder Sales Funnel
Now let’s talk about maximizing CLV so that you could then increase your CAC.
We believe that the most effective way to do that is the Value Ladder sales funnel.
It was created by our co-founder Russell Brunson who then used it to take ClickFunnels from zero to $10M+ in annual revenue in just one year (it’s at $100M+ now!).
This sales funnel has four stages:
- Bait. You offer the potential customer your lead magnet in exchange for their email address.
- Frontend. You offer the potential customer your least expensive and least valuable product or service.
- Middle. You offer the customer a more expensive and more valuable product or service.
- Backend. You offer the customer your most expensive and most valuable product or service.
Ideally, you also offer a continuity program of some sort, meaning, a subscription product that generates recurring revenue.
The reason why this sales funnel works so well is that it allows you to:
- Start the relationship with that person by offering free value.
- Nurture that relationship by continuing to provide free value via email.
- Build trust by providing progressively more paid value at each stage.
Here’s how Russell explains it:
Here’s what we recommend:
Build a Value Ladder sales funnel for your business to maximize your CLV, then get aggressive about customer acquisition by increasing your CAC.
Your competitors will struggle to keep up, especially if they are still wasting money by driving traffic directly to their websites or sales pages.
Remember: whoever can spend the most to acquire a customer wins!
Build Your First Sales Funnel in Just Five Days!
Let’s keep it real:
Building a sales funnel from scratch can seem like a daunting task.
That’s why we created our 5 Day Lead Challenge where Russell walks you through it step-by-step.
- Create your first lead magnet.
- Build your first squeeze page funnel.
- Set up a 6-email welcome sequence.
- Launch your funnel.
- Start driving traffic to it.
…in just five days!
So don’t hesitate. Take action. It can change your life!
P.S. This challenge is completely FREE!