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Reduce Customer Acquisition Cost with AI

2-minute read

Calculating customer acquisition cost (CAC) can be a somewhat depressing task for marketers and there’s an alarming trend. 

Gaining visibility online, whether through advertising or social media is becoming more difficult and more expensive. A standard online search prioritizes paid advertising over organic results regardless of the industry. This indicates that online visibility is not necessarily about product or pricing or even keywords and SEO. It is now about how much brands are willing to invest to top the search rankings. With this in mind, it may seem an impossible goal to reduce CAC. 

How can brands focusing on digital channels achieve growth targets if returns start diminishing even before they’ve started on the task of converting customers?

Can CX attract more customers?

Analysts agree that there are few opportunities in E-commerce for brands to differentiate themselves online, yet the most consistently impactful strategy is to focus on customer experience (CX). This means moving away from selling the features of products and instead redefining marketing strategies with customers at the centre. Creating meaningful marketing efforts that connect with customers and delight them with effortless online shopping experiences. In other words, hook visitors with a promise of great experiences by serving up relevant content when they need it and then following through with a frictionless customer journey that gets them to buy. 

How does improving CX reduce CAC?

CX plays an important role in customer retention but can it reduce the costs of acquiring new customers? 

Marketers sometimes feel that it has to be one or the other and debate whether it’s a better strategy to focus on customer acquisition over retention. The argument against retention is that there will always be customer churn; constantly topping up the sales funnel is necessary. 

By contrast, it generally costs seven times more to acquire new customers than to retain existing ones. Focusing primarily on customer acquisition will erode revenue over time especially when the CAC keeps increasing. 

Improving CX can help achieve both objectives in that it transforms existing customers into brand evangelists. Customers who have great experiences are more likely to return to buy again, buy more, and let others know about their positive experience and even post reviews. This is a key strategy that Amazon employed early on and why they are a market leader in terms of customer obsession.. This form of social proof is far more valuable than paid advertising because to potential customers it’s more believable. It’s not some slick advertising campaign, it’s genuine customer experiences. 

Being equipped to deliver great CX

While improving CX may appear simple, implementing it requires leveraging technology that can successfully navigate the many complexities and variables that come with serving up more personalized digital experiences. With constantly changing customer preferences, brands need to be able to see how website visitors respond to ideas so that they can respond quickly with relevant offers and information. 

Traditional testing tools lack the capabilities to be able to experiment at scale. By contrast artificial intelligence (AI) thrives on complexity and easily keeps pace with many changing variables and different combinations that make serving up unique and personalized experiences possible. AI enables brands to experiment with ideas with real website visitors and see which individual one or combinations are the top performers. Because AI is constantly learning from real visitor behavior, it continues to optimize CX throughout the customer journey. A distinct advantage of AI-driven optimization is that experiments can be added to, changed or paused at any time and the platform never stops optimizing towards achieving the best results. 

Optimizing CX with the goal of reducing the cost of acquiring customers helps to align digital strategies and can increase conversion rates and generate revenue lift while experiments are still running. Brands not only improve CX through AI-driven optimization, they’re also able to benefit from meaningful customer insights to continue improving digital experiences and achieve their goal of reducing CAC at the same time.

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