How brands can reduce acquisition costs and use their customers to grow

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Paul Archer, CEO and co-founder of Duel

In today’s fast-paced and competitive business landscape, growth is a constant pursuit for brands and retailers, but skyrocketing customer acquisition costs are holding them back.

Many businesses we have spoken to find that their acquisition costs are often more than their customer lifetime value. Research from ecommerce technology company SimplicityDX shows that customer acquisition costs have increased by 222% in the last eight years alone.

Why is the cost of acquisition so high?

Prior to Covid-19, the majority of brands and retailers were advertising across a wide range of channels, both on and offline. However, when the pandemic hit, those businesses were restricted to online channels, which prompted many brands and retailers to reinvest all other marketing budgets into online advertising.

This led to a short-term increase in sales for most online retailers and brands – with little else to do during lockdown, many of us did a lot of online shopping. But as offline incumbents moved online, customer acquisition costs dramatically increased and advertising campaigns became less effective.

The cost of living crisis and increased interest rates have drastically impacted consumer spending habits in the last year. With acquisition costs on the rise and consumer spending down, it is no surprise that most of today’s direct-to-consumer brands are looking for ways to reduce their acquisition costs and grow organically.

But how can they do this?

Focus on building a community

CRM software company HubSpot says 81% of consumers trust recommendations from their friends and family before making a purchase.

The key to growth for brands and retailers, therefore, will be to turn their own community – of customers, employees, sponsored athletes, industry professionals and more – into an army of supporters (we call them advocates), capable of promoting the business to their own networks.

The way to do this is by creating bespoke referral programs, loyalty initiatives, and exclusive reward schemes to motivate the community of supporters to share their positive brand experiences with their family and friends.

Some of the world’s biggest and most influential brands including Lululemon, Patagonia, Rab, Charles & Keith and Monica Vinader have grown in this way. They are all community-powered brands that do not pump huge sums into online advertising to promote their products, but instead trust their customers to do it for them – and to great effect.

Invest in user-generated content

Consumers find user-generated content (UGC) 9.8 times more impactful than influencer content, and 79% of consumers say UGC highly impacts their purchasing decision, research by social content marketing platform Stackla shows. That is because regardless of age, consumers want to see what other people are saying about a brand – not what a brand is saying about itself – before buying from it.

We are increasingly looking for real content, created by real people, whom we can relate to and trust in order to make better and more informed buying decisions. That could be from family, friends, communities we are part of, or authentic brand advocates we follow on social media.

The best way for brands to take advantage of UGC is to build a loyal network of brand fans and then make it easy for them and incentivise them to create and share content with their own followers. Companies such as Charlotte Tilbury, Mint Velvet and Gymshark do this: they trust their customers to share their own content with their own followers, and have all grown as a result.

Redefine the influencer

Brands and retailers have historically got their influencer marketing strategy wrong because they focus on the wrong influencers – such as random celebrities who know nothing about the business and would happily promote a competitor if the price is right.

However, the concept of influencer marketing is a great one. As we know, people buy into people, and true influencer marketing is all about authentic storytelling for brands and retailers that want their message to not only be heard, but trusted and actioned.

Brands and retailers need to redefine who their real influencers are – and this starts closer to home, by identifying superfans from within their own customer base. These consumers may not buy the most, but they have the most influence because they tell everyone they know about their favoured brands. This makes them the most powerful engine of word of mouth and free customer acquisition.

The future

To reduce acquisition costs and grow organically, brands and retailers need to turn their own customer base into a sales channel. They can do this by focusing on growing a community of brand fans who can promote the business to their own networks, with their own content.

For more information on how to turn your customers into your biggest sales channel, visit: duel.tech

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