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What is Customer Acquisition Funnel

Tips & Guides — 29 Apr 2022

What is Customer Acquisition Funnel

Customer Acquisition Funnel

Customer acquisition is vital for business success. Without new customers, you’re limiting business capability and growth. So, it should form a central part of your marketing strategies.

Companies use models, like marketing funnels, to form strategies and develop methods to engage with customers during the buying process. Similarly, you can use a customer acquisition funnel to understand the customer journey and tie your marketing, sales, and customer service teams to increase acquisition.

Here we’ll go through the customer acquisition funnel and tips you can use to get more customers and improve your overall customer acquisition process.

What is customer acquisition?

Customer acquisition is the process of gaining new customers. It involves using specific activities and techniques to guide potential customers into taking action. It could be making a purchase, signing up for a newsletter, or following you on social media.

A customer acquisition funnel visualizes the customer journey much like marketing or sales funnels to boost lead generation and turn prospects into paying customers. But, there is a difference between the customer acquisition funnel and that seen in sales or marketing.

While marketing teams focus on brand awareness at the top of the funnel, a sales team looks to drive customer purchases at the bottom. A customer acquisition funnel details the entire customer journey from awareness to purchase and beyond.

For example, you might have a digital marketing campaign running ads with call-to-actions (CTAs) directing customers to your landing pages. You can use metrics to determine the effectiveness of your marketing strategy, but this is where marketing insights stop.

Customer acquisition doesn’t. It’s concerned with what happens after prospects visit your website and where they go from there. It drives actions at each step of the customer journey to drive buyers to become loyal customers.

customer acquisition
Source(brandequity.economictimes.indiatimes.com)

Importance of customer acquisition

Acquiring new customers is essential for business growth, improving your conversion rate, and boosting revenue. But, if you already have strategies to attract customers, why would you need to create yet another funnel for your business?

Unlike marketing or sales, the customer acquisition process is concerned with the entire customer journey instead of specific stages. An effective funnel lets you map out the route your customers take, highlight issues, learn about their actions and what they liked or disliked.

This information allows you to streamline the buying process, improve customer experiences, reduce churn, and boost lead generation. Solid acquisition processes will help you avoid lost prospects or have miscommunication within your team. 

Much like a business model, it shows how you can deliver value and boost your marketing efforts and sales processes to drive revenue.

What is a customer acquisition funnel?

Like a traditional physical funnel, a customer acquisition funnel starts as a wide opening and tapers. The shape represents the customer journey and how the number of customers change. 

The top of the funnel is the widest, with a large pool of potential customers interested in your business. It’s narrowest at the bottom as high-quality leads move forward with their purchase, but low-quality leads don’t. 

An acquisition funnel lets you reduce lost customers. In mapping out the customer experience, you can identify issues and make effective improvements to your acquisition strategies, such as email marketing or social media campaigns.

Customer acquisition processes differ slightly between businesses, but they have three main phases: awareness, consideration, and decision-making. These phases are often split up into different stages, leading to various funnels and funnel designs emerging over the years to reflect the ever-changing business-customer relationship.

However, a modern funnel usually has seven stages of customer acquisition.

Funnel vs Flywheel
Source(growth-rocket.com)
  1. Awareness

Awareness is at the top of your funnel, and it’s often considered a marketing stage. It’s where customers first find out about your business, products, or services. It could be through influencers, ads, social media marketing, or inbound marketing, like blogs, podcasts, SEO, and other valuable content. 

It’s arguably the most critical part of the funnel as it defines the number of potential customers from which you can draw out high-quality leads.

Partnership marketing platforms like Affise Reach can be invaluable in this stage to reliably source influencers to drive brand awareness, customer acquisition, and generate higher quality leads.  

For example, if you’re selling online games, you can partner with popular influencers on gaming acquisition channels like Twitch, to boost the quality of potential leads.

    2.Interest

Once your customers know you exist, you must build interest in your brand to nudge them towards making a purchase. Appealing to emotions and using customer stories will assist in capitalizing and retaining as many potential customers from the previous steps.

Using customer acquisition channels, such as direct mail, social media marketing, and content marketing, can be ideal in driving engagement and interest.

For instance, you can hold a Q&A live stream about your free video conferencing solutions or run a social media challenge to choose a new filter. It can give you the virality you need to build interest in your business or products.

    3.Consideration

Consideration is the first active stage of the acquisition funnel. Here, prospects have downloaded content, signed up for newsletters, or had free trials. They haven’t made a purchase yet, but they’re thinking about it.

Driving customers to this stage is tricky. You have to make your business or product appealing to get them to make a soft purchase. Consider using exclusive template downloads, personalized content, and extended or full-feature trials to help sweeten the deal. 

Shoppers' Important Purchase
Source(marketingcharts.com)

    4.Intent

At this stage, prospects are inching ever closer to becoming paying customers. They’ve signaled their intent by adding products to their wishlist or shopping cart and are looking for reasons to submit their order.

    5.Evaluation

In each of the previous stages, you’ve increasingly engaged with prospects. Now, they’re teetering on the edge of the purchasing cliff. They just need a gentle push to buy your products.

At this point, prospects are weighing up the pros and cons to see if they’re getting a good deal. They’ll consider prices, features, delivery options, and competitor choices. It’s in your hands to ensure that you’re outperforming your rivals in the right areas to gain customer approval.

    6.Purchase

After nurturing your leads, they’ve finally taken the all-important step to becoming a customer. Understanding what drove them here is essential to improve your sales processes, streamline the customer journey, and increase conversion rates. 

    7.Customer retention

A business can’t survive on one-time customers alone. You need loyal and returning customers to provide you with online support, word-of-mouth marketing, and regular income. 

After the sale, look for ways to cross-sell, upsell, and provide rewards to improve customer retention. You could use discounts, a referral program, or gifts. With retention being a benefit of partnership marketing, solutions like Affise can help you with this stage.

By focusing on customer retention in your acquisition funnel, you can boost your customer lifetime value (LTV). It builds a long-lasting, successful business-customer relationship.

Costumer churn rate
Source(statista.com)

Choose a funnel that fits you

There exist various funnels and models with different phases, stages, and loops available. While these seven stages put you on the right path, you might decide on a different model to visualize your customer journey. Consider three areas before making your decision.

  • Your competition

Well-established competitors usually know what works and what doesn’t. They know the ideal customer, the best acquisition channels, and how to deliver a strong message. Look to learn from them.

You can get ahead by following the same acquisition process they have. Then, you can finetune it to meet your needs and adapt to your unique business.

  • Identify customer behavior

What customer behaviors are important to your funnel? Is your acquisition online, offline, or both? Do your products need little consideration, like a reusable water bottle, or longer, like a CRM system?

Pick a funnel, flywheel, or other design to suit your customer behavior and also works with the journey they take.

  • Focus on the important stage

What stage of the funnel is most important for your business? Some companies struggle with the final push to purchasing, but awareness isn’t an issue.

Build your funnel around the stage you want to concentrate on. It will bring the most value to improving your strategies and revenue.

Tips to improve your customer acquisition and funnel

You likely have customer acquisition strategies to attract new buyers to your business. Here, we’ll go over the ways you can improve your customer acquisition funnel as a whole and ensure those strategies work as well as possible.

Percentage of US Internet user
Source(statista.com)

Find your target audience

The top of the funnel focuses on spreading product and brand awareness to a large pool of consumers. But, if you’re not targeting the right people, you’re wasting your marketing and acquisition efforts on low-quality leads that won’t convert. 

For successful customer acquisition, you must define a buyer persona for your target market. The persona will help you understand customer motivations, behaviors, and effective acquisition channels.

For example, 77% of 15-25-year-olds use YouTube. So, targeting this group involves video content marketing, partnering with YouTube creators, and developing video ads.

Understanding your target audience and ideal customer ensures you’re using your resources effectively, increasing your ROI.

Create specific goals and KPIs

Everyone works towards something. Whether it’s a runner aiming for a podium finish or an SaaS company looking to boost sales, goals are vital to track progress and hit milestones. 

To acquire customers effectively, your employees need well-defined objectives to guide them in the right direction and help them make the right decisions to get more customers. By creating meaningful goals and KPIs, you tell your employees what you expect of them, the milestones they should be aiming for, and how to spend their time. 

Incorporate goals into your customer acquisition process to guide your marketing and salespeople to boost conversion rates and revenue. Ensure your goals are SMART:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Timely

For instance, if your goal is to halve the time it takes prospects to move from the evaluation to purchase stage in the next three months, your teams have a better idea of where their efforts and strategies should target. 

Source(blog.hubspot.com)

Track and measure success

Once you have your goals, you need to ensure your business stays on track to meet them. Setting KPIs and measuring metrics lets you:

  • Track strategies
  • Track employee progress
  • Monitor customer journey/funnel

Remember, the acquisition funnel is a visualization of the customer journey. By tracking it, you can gather vital statistics to grow your business. 

Data analytics gives you crucial information to optimize the customer experience and acquisition process. Some ideal metrics to monitor to improve acquisition include:

  • Customer acquisition cost (CAC)
  • Lifetime value (LTV)
  • Clickthrough (CTR) rates
  • Average order value (AOV)
  • Cart abandonment rate
  • Return/refund rate

Software tools like Affise BI can help simplify your data gathering and analysis. They give your team easy data access by bringing unstructured data from multiple marketing channels onto one dashboard. By identifying valuable insights from key metrics, you have given yourself a competitive edge in acquiring customers.

Identify and resolve bottlenecks

Imagine you have an ecommerce store. Every day you have thousands of visitors but just a handful of sales. While you’re doing well at the top of the funnel, you’re struggling to convert customers at the bottom. 

This is known as blockage or a bottleneck. There’s a problem that’s preventing you from acquiring new customers. Identifying and resolving issues lets your business grow and succeed unhindered.

Bottlenecks could be due to several reasons, such as:

  • Wrong product-market fit
  • Low brand reputation
  • Better competitor deals
  • Inventory issues

These issues can be simple to fix. For instance, if you’re struggling to manage item quantities, an inventory system can automatically manage inventory turn over, ensuring your prospects aren’t seeing out-of-stock or delayed orders.

Simplify your funnel

Your funnel details your customers’ journey and the different channels, tactics, and strategies you use throughout it. However, it’s easy to complicate by making it overly personalized and confusing for your employees to understand. It leads to inefficient tactics implemented by teams that aren’t sure what they’re supposed to do.

Do a sense check. Can you give the funnel to a new employee who can understand your customer acquisition process? Look to simplify it until they can. It might mean using a different model or rethinking the customer journey.

Marketing and sales
Source(marketingcharts.com)

Improve internal communications

We mentioned previously that the marketing and sales teams tend to operate at opposite ends of the funnel, but that doesn’t mean they operate independently. 

For example, the marketing team is responsible for brand messaging. If they make promises the sales team can’t fulfill, prospects are left unsatisfied, and sales will be aborted, leading to lower acquisition rates.

This affects more than just a few sales. Miscommunications can have you focusing on the wrong issues, leading to an incorrect customer journey and funnel. Ensure good communication between your teams and work with them to outline their role in the customer acquisition process.

Be flexible and sustainable

You must ensure that your acquisition funnel and strategies are sustainable and flexible.

  • Flexibility means responding to the changing consumer-business relationship and market trends. For instance, consumers once bought products from door-to-door salespeople, but now they’re more likely to listen to live chats and virtual assistants for advice.
  • Sustainability refers to acquisition strategies that work in the long term. So, any investments you make will work in the future. It could be new employees, new software, platform migration, or marketing tactics.

For example, ads are flexible but short-term acquisition strategies. However, blogs can provide content marketing for as long as it’s available, making it a sustainable acquisition strategy for your funnel. It can be flexible if you reach out to creators to write related content or produce podcasts based on your blog posts. 

Use different techniques

Startups use growth hacking to drive business growth. It involves using different tactics, identifying the best one, and optimizing it. Experimenting with strategies like this can help you reach goals quicker and boost customer acquisition.

Business-customer relationships are constantly changing, and acquisition strategies must change to keep up. By implementing different acquisition techniques in your funnel, you can experiment to find the ones that work best and set a new benchmark for success.

For example, you can use A/B testing to decide on the most effective landing pages, content, or discounts. Always look to improve your strategies and remove past methods from your funnel if they no longer work.

Additionally, automation or new software platforms are other considerations to speed up working processes and quicken repetitive manual tasks like email segmentation. For instance, instead of manually creating partnership marketing opportunities, you can use tools like CPAPI

CPAPI lets you work with thousands of advertisers and offers. API integration between sources of offers and your system means promotions transfer automatically. It improves brand awareness, acquisition channels, and forms fast, reliable partnerships.

Build partnerships with brands

Partnership marketing is a symbiotic relationship. You and your partners benefit from each other’s influence to sell products, boost reputation, and increase revenue. Whether you’re partnering with influencers, creators, or other brands, it’s an effective way to add more customers to your funnel and reduce the customer acquisition burden.

Look for brands or influencers that reach out to your target audience. For example, if you’re a virtual PBX provider, a YouTube tech or business creator is more helpful to you than a coffee channel.

Consider using partnership marketing platforms to create valuable and profitable relationships. Solutions like Affise Reach provide reliable brands and influencers to drive sales.

Measure customer acquisition cost

Simply put, Customer Acquisition Cost (CAC) is the amount of money a business invests for one customer. It’s calculated by dividing sales and marketing costs by the number of new customers in a specific period.

The CAC is an important part of your acquisition funnel and strategies. It shows you the value of your acquisition efforts and allows you to measure your ROI. But, CAC differs across different industries, so you need to compare your CAC with your industry to see where you stand and where you should be.

For example, a coffee shop like Starbucks has a low CAC as coffee is a daily drink for many people. However, smartphones are purchased once every few years, so CAC for smartphone companies will be higher.

Measuring your CAC and understanding how it relates to the industry lets you identify cost reductions, remove ineffective strategies from your funnel, and prevent wasted resources.

average costumer acquisition
Source(shopify.com)

Your funnel is your acquisition process

Looking for ways to improve your customer acquisition is vital to business growth and long-term success. But, to create an acquisition process that works, you need to map out the customer journey to identify the channels and strategies you can use to increase conversion rates.

An acquisition funnel acts as a guide to aid your decision-making and allows your marketing, sales, and customer service teams to understand their roles and motivations in the journey. 

But, the funnel is specific to your business. You might prefer a flywheel approach to customer acquisition with fewer or more stages than the one given here. As long as you include the three acquisition phases (awareness, consideration, and decision-making), you can use the design that best fits your business.

With the tips and stages provided here, you can begin building your acquisition strategy and funnel based on your customers’ journey, reduce CAC, and boost customer LTV.

Building brand partnerships can be especially helpful in alleviating the customer acquisition burden. Partnership marketing platforms, like Affise, can drive brand awareness. It reliably partners you with other brands, agencies, and advertisers, increasing customer acquisition. 

However, don’t leave your funnel alone. Business-customer relationships continuously change. You’ll need to target new channels and use different methods to acquire customers. Measure and evaluate your processes regularly, adjusting as necessary to ensure flexible and sustainable strategies for current and future success.

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Jenna Bunnell - Senior Manager, Content Marketing, Dialpad

Written by

Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad, an AI-incorporated cloud-hosted unified communications system that provides valuable call details for business owners and sales representatives. She is driven and passionate about communicating a brand’s design sensibility and visualizing how content can be presented in creative and comprehensive ways.