The success of an IT or technology company has a high correlation to its ability to acquire new customers (and retain existing ones.)
In short, for IT companies, it’s very important to have a working customer acquisition strategy and for the IT companies to have a thorough understanding of their unique customer acquisition process and the effectiveness of their efforts in acquiring customers.
Measuring the performance of their customer acquisition efforts is critical for technology companies to help them allocate resources more effectively and make informed decisions to improve their customer acquisition strategies.
This article will cover a comprehensive guide on how to measure the effectiveness of customer acquisition campaigns for technology companies, and we’ll cover:
The importance of tracking the right metrics according to your customer acquisition goals
- How to implement a tracking system to measure customer acquisition efforts
- Interpreting and analyzing data related to customer acquisition efforts
- Optimizing customer acquisition efforts based on the analyzed data
- Let’s begin this guide from the basics: what is customer acquisition?
What is customer acquisition?
Customer acquisition refers to the efforts and strategies a business takes to acquire new customers. Different businesses may use a variety of customer acquisition strategies, but the goal always remains the same: attract new customers and build a loyal customer base.
Without the ability to attract new customers, a business won’t grow and won’t achieve success. This also applies to any IT and technology companies.
The actual customer acquisition process can be complex and can involve multiple departments: marketing, sales, customer service, and others working together to convince a prospect to convert into a customer.
Different prospects may experience different steps in their journeys until they finally make a purchase and turn into a paying customer. A customer may learn about a SaaS product and purchase it right away, while another may take weeks or even months to compare different solutions before deciding on a purchase.
However, a typical customer acquisition process involves the following stages:
- Awareness: if a prospect is not aware of your product’s existence, they won’t buy it, period. The awareness stage is mainly about getting your brand and SaaS product in front of potential customers so they are aware of your offer and its potential benefits for them. Various marketing strategies can be used to generate awareness but mainly content marketing, advertising (online and offline), and social media.
- Interest: Once a potential customer is aware of your product or service, the next stage is to generate interest and–if possible–start building a relationship with them. The main activity of this stage is to capture prospects’ contact information, effectively converting them into leads. This stage typically involves the technology company offering something valuable for free, including a free trial or demo, to encourage potential customers to submit their contact information (i.e., sign up for an email newsletter.)
- Consideration: At this stage, the lead is already considering the IT product or service as a potential solution for their problems. At this stage, potential customers may compare your product or service with your competitors’ and conduct their own research. Potential customers at this stage may also engage with your sales or customer service teams.
- Conversion. The potential customer finally makes their purchase, and effectively converts into a paying customer. This stage is mainly about closing the sale, and convincing the potential customer in order to secure their commitment to your IT product or service. The technology company can utilize various sales and customer service tactics at this stage to help increase the conversion rate, ultimately securing more customers.
- Retention. Not always considered a part of the customer acquisition process since this stage actually happens after the acquisition. Retention is about retaining your existing customers so they keep subscribing to your services or keep making repeat purchases of your products. The focus of this stage should be about continuously improving your product or service to meet your customers’ needs while also maintaining good relationships. Other tactics of this stage may involve offering value-added services and providing excellent customer service.
Again, it’s important to note that not all customers may follow these exact customer acquisition stages, and some may not follow a linear path at all. Yet, although the actual process may differ, the fact remains that an effective customer acquisition strategy would always require a thorough understanding of the buyer’s journey and the impact of different customer acquisition efforts at each stage.
For technology companies, understanding their own unique customer acquisition process is critical, so they can identify where they can improve and acquire more customers via data-driven decisions.
Defining customer acquisition goals and metrics
The first and most critical step of tracking your customer acquisition performance is to define what success looks like for your IT and technology company.
If you don’t know your customer acquisition goals, you won’t be able to identify what metrics and KPIs to track, and you may direct your efforts in the wrong places.
While the end goal of all customer acquisition efforts would be to acquire more customers, there are other common customer acquisition goals for technology companies to consider, including but not limited to:
- Lowering the customer acquisition cost (CAC)
- Reducing the average time it takes to acquire new customers
- Improved lead conversion rate (the percentage of leads that convert into paying customers)
- Increased customer lifetime value (CLV)
- Improved customer retention rate
When defining your customer acquisition goals, it’s best to follow the SMART goals framework so it’s easier to track your progress:
- Specific: goals should be specific, clear, and concise. It should be easy to explain what the goal is and easy to measure
- Measurable: goals should be quantifiable, and we should be able to track and measure the progress against them
- Attainable: goals should be realistic to achieve within the IT company’s available resources and constraints. If goals aren’t achievable, it may hurt the team’s morale
- Relevant: goals should be relevant to the technology company’s overall strategy, and must align with the company’s mission and values
- Time-bond: the goals should have specific deadlines so that they can be achieved within a set timeframe and we can track the progress against them
Some examples of SMART customer acquisition goals include:
- Increase the number of new customers acquired each month by 15% within 6 months
- Lowering the CAC by 10% within a year, by the end of February 2024
Determining the right metrics to track
Once we’ve identified the IT company’s customer acquisition goals–ideally according to the SMART goal framework— then you can determine the metrics we’ll use to track the progress towards these goals.
The metrics to track will obviously vary depending on the goals themselves, but here are some of the most common customer acquisition metrics for technology companies:
- Customer Acquisition Cost: or CAC, is the total cost of acquiring a single customer. It is calculated by measuring all marketing, sales, and customer service costs, but also other expenses related to acquiring a customer. The lower the CAC, the better.
- Generated leads: the total number of leads generated over a given period (i.e., every month.) A ‘lead’ technically refers to any prospect that has shown interest to your product or service, but in practice, is a prospect who has submitted their contact information, and technically given their permission for your business to contact them.
- Lead conversion rate: the percentage of leads that convert into paying customers. We can also measure the overall conversion rate–the percentage of website visitors who become paying customers (for all channels or food-specific marketing channels.)
- Time to acquire a new customer: the time it takes to acquire a single new customer, measured from the moment someone converts into a lead to the moment this person makes their purchase.
- Customer Lifetime Value (CLV): refers to the revenue a customer brings to the business over their whole relationship with the business. A higher CLV means the company is bringing more customers that bring more value to the business.
- Customer churn: the percentage of customers who stopped buying your product or service, a critical metric to measure for IT companies with the subscription-based business model.
- Customer lifetime: the length of time a customer remains a loyal customer.
This is obviously a non-exhaustive list, and you can definitely track more metrics as you see fit. The idea is to find metrics that can help you measure the effectiveness of your customer acquisition efforts, identify areas that you can optimize, and make more informed, data-driven decisions to help you acquire more customers.
Measuring and tracking customer acquisition efforts
Now that we’ve defined the customer acquisition goals and the metrics to track, the next step is to set up systems to enable accurate measuring and tracking of your efforts.
We can divide this step into several processes:
- Implementing a CRM system
A Customer Relationship Management (CRM) system can help your technology company track and manage customer information and interactions data throughout their relationship with your business (customer lifecycle.)
When implemented properly, a CRM system can provide a centralized platform for tracking and managing customer data, which can benefit the technology company in several ways:
- Store, track, and manage customer information: A CRM system acts as a centralized hub for storing customer information such as conversion rates, lead generation metrics, customer lifetime value (CLV), and other useful data. This can facilitate real-time measurement of customer acquisition efforts’ effectiveness to help the IT business make data-driven decisions.
- Streamline the sales process: A CRM system can streamline and even automate some if not all of the sales processes from lead generation to the actual purchase. This can help IT and technology companies improve their sales efficiency while allowing them to focus on more critical activities that drive customer acquisition.
- Improve customer satisfaction: A CRM system can act as a centralized hub for tracking and managing customer interactions, support requests, and customer relationships in general. This can help IT businesses respond to customer needs more effectively, quickly, and accurately, improving customer satisfaction, reducing churn, and increasing the likelihood of accuracy.
- Improve marketing effectiveness: A proper CRM system can integrate with other marketing automation tools and solutions. This will allow technology companies to accurately track the effectiveness of their marketing campaigns and make informed data-driven decisions to conduct more effective and efficient customer acquisition efforts.
In short, any technology and IT company should consider investing in a CRM system in order to improve their customer acquisition efforts and improve customer retention.
- Tracking leads and conversions
Tracking leads and conversions is a critical aspect of measuring customer acquisition efforts.
Again, a CRM system can provide enormous benefits in helping the technology company measure customer acquisition efforts by tracking the number of leads generated, the time it takes to convert a lead into actual customers, the lead conversion rate, and other important metrics.
Tracking these metrics would help technology companies identify areas for improvement, test different strategies, and make more informed decisions to generate more leads, improve the lead conversion rate, and increase the customer acquisition process’s efficiency.
- Measure the performance of marketing and advertising campaigns
It’s crucial for IT and technology companies to regularly keep track of their marketing and advertising campaigns’ performances by tracking metrics such as:
- Click-through rate (CTR): the percentage of users who click on an advertisement compared to the total number of ad impressions. A higher CTR is a good indication of engagement.
- Conversion rate: the percentage of visitors who take a desired action (i.e., sign up for an email newsletter, fill out a form, make a purchase, etc.)
- Cost per click (CPC): the amount paid for each click on an ad. Lower CPC means the ad is more cost-effective.
- Return on investment (ROI): the profitability of an advertising report, calculated by dividing the revenue generated from the advertising campaign with its cost.
This is a non-exhaustive list, and there are other metrics technology companies can track to measure and optimize their marketing and advertising campaigns.
Tracking these metrics can help companies determine the effectiveness of marketing and advertising efforts on different channels, as well as make data-driven decisions to optimize their marketing and customer acquisition spend.
- Evaluating sales and customer service efforts
Don’t underestimate the potential impact of customer service on customer acquisition and retention. The quality of customer support offered during your product’s free-trial period, for example, can influence a prospect’s final purchase decision.
Some important sales and customer service metrics include:
- Lead response time: the time it takes for the company’s salesperson to follow up with a lead. A faster response time typically results in a higher conversion rate.
- Customer satisfaction score (CSAT): typically measured through a customer survey, CSAT measures the level of customer satisfaction with the technology company’s product
- Sales conversion rate: the percentage of leads that turn into customers. A higher conversion rate typically indicates more effective sales efforts.
- Customer retention rate: the percentage of customers who continue to use the company’s product or service. A higher retention rate indicates stronger customer loyalty.
- Net promoter score (NPS): a high NPS means customers are more likely to recommend the company’s product or service to others and may indicate strong customer satisfaction.
Again, this is a non-exhaustive list, but technology companies should regularly monitor their sales and customer service efforts to optimize customer experience and satisfaction.
- Understanding the buyer’s journey
A buyer’s journey (or customer journey) refers to the steps customer takes from the moment they learned about an IT company’s product or service to the moment they finally make a purchase.
Understanding a buyer’s journey is critical for optimizing customer acquisition efforts, as it offers valuable insights into the customer’s needs, pain points, and behaviors in their decision-making process.
To understand the buyer’s journey and how it plays its part in customer acquisition, the technology company can measure a variety of metrics at different stages of the journey:
- Awareness stage: helps the company understand how people first heard about them, and how many people are aware of their brand. Metrics to measure in this stage include website traffic, social media engagement metrics, or results from brand recognition surveys.
- Consideration stage: measuring relevant metrics at this stage helps IT companies understand how many people are considering their product/service as a potential solution for their problem. Metrics in this category may include the number of website visits, the number of product demo requests/free–trial sign-ups, time spent on product pages, etc.
- Conversion stage: helps the company understand how many people have taken the step to become purchasing customers. Metrics to monitor at this stage include the total number of sales generated, the lead-to-customer conversion rate, and the average sales value.
- Retention metrics: measuring metrics at this stage such as customer retention rate, customer lifetime value (CLV), and the percentage of repeat customers may help technology companies understand how many people keep using their products or services over time, and why they stop purchasing/subscribing from them.
Measuring these metrics to understand the buyer’s journey can provide valuable insights for the company to improve its marketing and sales strategies in order to acquire and retain customers more effectively.
Analyzing and interpreting customer acquisition data
A critical aspect of measuring and tracking customer acquisition efforts for IT companies is about analyzing and interpreting the collected data.
No matter how many metrics and KPIs you’ve tracked, it won’t bring much value to your IT business and especially your effort in tracking your customer acquisition performance if you don’t (or can’t) interpret the data into usable insights.
Below we will discuss how you can analyze and interpret the customer acquisition data so IT companies can use it to make informed and data-driven decisions to improve their overall performance.
- Identifying patterns and trends in customer acquisition data
One of the first—and most important–things you should do in analyzing customer acquisition performance data is to identify any patterns and trends in the dataset.
The most common approach is to look for commonalities in the data, for example:
- Optimal customer profiles: common characteristics of prospects that are more likely to convert and/or become loyal customers
- High-performing channels: for example, you may find out that SEO and content marketing generate a higher volume of leads than paid social media ads
- Device/platform usage: you may find out that customers who accessed your site from a computer/laptop are more likely to convert than those who accessed your site from mobile devices
- Time to conversion: common length of time needed for a lead to convert
- Seasonal trends: for example, spikes of conversion or lead generation during the holidays
Identifying these patterns and trends would allow companies to optimize their customer acquisition efforts to target the most qualified prospects with the right content on the right channels.
- Understanding the impact of different customer acquisition strategies
Another crucial aspect of customer acquisition data analysis is to compare the performances of different customer acquisition channels and/or campaigns to determine which ones are the most effective at driving acquisition.
Here are some common methods you can use:
- Attribution modeling. Assigning score/credit for a conversion to one or more customer acquisition channels.
- URL tracking. Creating unique URLs for each channel or campaign, so you can track how many clicks, leads, or conversions came from that specific source.
- Conversion rate analysis. Comparing the conversion rates of different customer acquisition channels.
- CPA (Cost per acquisition). Comparing CPAs of different channels to identify which are more cost-effective.
- CLV (Customer lifetime value). Analyzing the CLV of different customers acquired through different channels to identify which channels are driving more valuable customers.
These methods (and more), would allow the IT/technology company to allocate their resources more effectively and optimize their customer acquisition strategies to achieve the best possible results.
- Evaluating the ROI of customer acquisition efforts
Technically, we can always acquire more customers by spending more money. For example, if we run a restaurant and announced free meals for everyone, obviously we’ll get a lot of people coming to the restaurant, but doing so won’t drive revenue to the restaurant.
There’s the possibility of losing money despite you acquiring more customers, so it’s critical to evaluate the ROI of different customer acquisition efforts.
The basic approach is to calculate the customer acquisition cost (CAC) of each channel and compare it to the customer lifetime value (CLV) of the customer. Doing so would allow IT companies to determine their most effective channels/campaigns and allocate more of their resources to those that generate better ROI.
Develop an action plan to improve customer acquisition efforts
Use the results of your customer acquisition data analysis to make data-driven decisions and develop an action plan to improve your business’s customer acquisition strategy.
Below are the basic steps you can follow to help create your action plan:
- Identify areas for improvement. Identify bottlenecks and inefficiencies that you can improve whether immediately or on a longer-term basis.
- Conduct regular audit of customer acquisition processes and data, as discussed above.
- Collect feedback from stakeholders and customers to better understand their needs, preferences, and pain points. A more effective customer acquisition effort is one that better meets your audience’s needs.
- Monitor and analyze industry/market trends
- Keep track of your competitors’ approaches (competitive analysis) to identify gaps and opportunities
- Set goals and KPIs. Set realistic and specific goals and KPIs based on the analysis results by using the SMART (Specific, Measurable, Attainable, Relevant, and Time-bound) framework.
- Develop new strategies. Develop new customer acquisition strategies to target the identified areas for improvement. Before fully implementing these strategies, test and refine these strategies as needed.
- Involve and collaborate with marketing and sales teams so you can develop and implement these new strategies for converting customers
- Leverage new technologies when possible. AI and machine learning applications, for example, can help you optimize customer acquisition efforts.
- Refine and adjust existing strategies. besides developing and implementing new strategies, use A/B testing and your analysis results to optimize existing customer acquisition strategies for better performance:
- Monitor metrics and analyze data—as discussed above—to identify which strategies are working and which should be adjusted or eliminated
- Experiment with different content, messaging, offers, and designs to improve the performance of existing campaigns.
- A/B testing different channels and strategies to identify the most effective versions of strategies
- Evaluate and adjust the action plan. Once implemented, regularly evaluate the progress of the action plan and adjust it as needed. Think of your customer acquisition optimization as a long-term process, so aim to continuously improve it over time:
- Implement systems for regularly tracking relevant metrics to monitor your customer acquisition efforts
- Set up alerts and notifications so you can stay on top of significant changes in your customer acquisition efforts’ performances
- Use data visualization tools to more quickly and accurately identify trends and patterns in collected data
Measuring and tracking customer acquisition efforts is essential for IT and technology companies to achieve more success and growth.
Without a clear understanding of how customers are acquired, how much would it costs, and how effective their efforts are, developing effective strategies for growth and retention would be challenging.
By regularly keeping track of key metrics and analyzing customer acquisition data, businesses can identify areas for improvement and develop an action plan to optimize their customer acquisition efforts. Ultimately, this would allow them to achieve their goals while using fewer resources.