Deep Dive Series:
How Different Industries Approach Customer Acquisition

Welcome back to the Miss Details Deep Dive blog series on Customer Acquisition Cost.

In the first two entries of our customer acquisition exploration, we introduced you to the concept of CAC and started to delve deeper into the formulas and factors that comprise this critical aspect of your company’s financial picture. 

This week, we’re going to describe how business size impacts CAC, and then explore how those costs vary across industries. By the end, you’ll have gained greater insight into your own businesses’ costs, and might have picked up a tip or two which could lead to managing costs and improving your bottom line.

Scaling Your Costs: Why Business Size Matters

Businesses operate differently at different scales. Let’s use as an example a local sneaker store, Local Sneakers, compared with an international retailer, let’s call them Big Box Shoes. 

Local Sneakers has been around for over 50 years, opened by a husband and wife who eventually passed its ownership on to their daughter. Its clients include customers who have brought their children, and now grandchildren, to the store, as well as adults who have been shopping there all their lives. They have a smaller product line than Big Box Shoes, but their salespeople are experienced and knowledgeable. Located on a side road in a small town, they don’t get much walk-in traffic except for some nearby residents. They run a few local advertisements, including a sign in the high school gymnasium and a blurb on some restaurant menus, but most of their clients already know who they are.

Big Box Shoes is new in town, opening a few years ago. Their store is three times the size of Local Sneakers and has a much larger selection, but they rely heavily on seasonal staff that doesn’t know their products very well. Located in a new mall, most of their customers stop by on a whim, drawn in by the pictures of famous athletes and spokespeople in the windows and  their familiarity with the store from its Super Bowl advertisements. The store’s regional manager is spending tens of thousands of additional dollars, hosting autograph signings with the town’s resident sports star and running commercials during the evening news.

Even though both businesses are selling the same products for the same prices, there’s a huge difference in how they acquire their customers, as well as in the profit necessary for each sale. These disparities are due to the size of not only the overall companies, but of their marketing departments and budgets. 

Small to Medium Businesses

Building a customer base takes time and effort, and smaller businesses especially have to focus on their CAC to ensure their products and services are properly priced. Businesses who spend too much money on acquisition can increase their sales, yet still put themselves out of business. 

Clients go to local stores and use local services for numerous reasons: 

• Local stores and their employees have a connection to the community
• Customers feel like they’re receiving quality service, rather than being “just another job” to a conglomerate or corporation
• Customers feel that they’re supporting their friends, family, and community members 

At smaller businesses, customers most likely expect higher levels of employee knowledge and familiarity. This requires comprehensive employee training and increased retention costs, as skilled employees with years or decades of experience will cost more than younger or less experienced workers.

Medium to Large Businesses

Once businesses have grown to a certain size (how large that is depends on industry and situation), their costs change. Instead of only attempting to win over new customers, businesses now need to strike a balance between attracting the new and retaining the existing, and using those existing customers to help grow the base. 

Larger businesses have additional costs from their smaller counterparts:

• Increased marketing spending to keep the brand relevant, including high-profile ads (national television, prominent billboard campaigns, social media, influencers etc.)
• Increased auxiliary costs for employee training, hiring, and support positions (administrative, human resources, accounting/financial, etc.)

How Industry Affects Customer Acquisition Costs

Of course, much more than business size goes into what affects CAC. Different industries, locations, longevity, client base, and many other factors all make their mark, and each company’s unique setting requires them to directly tailor their marketing funnel to increase their client base. 

Ultimately, no matter what industry you’re in, you’re going to be using the same basic tools to move your customers into and through your sales funnel, though the approach and combination of tools you use will depend on your specific industry and circumstance:

• Social Media
• Email Marketing
• Content Marketing (Blogging, videos, etc.)
• Public Relations
• Direct Mail

No matter what it does or who it’s aimed at, your business will almost certainly need websites, graphics, employees, time and effort. Those factors apply across the board, though they take different forms in various situations. 

Here are how a few different industries can think about customer acquisition: