What is User Acquisition: How to Measure and Attract New Customers

May 25, 2021

Customer acquisition is the top priority for most brands that come to Hawke Media for marketing services. Sure, we can (and do) make incredible retargeting and returning customer campaigns, but every company will always want more new customers… and that’s not possible without user acquisition.

No matter the industry or the target demographics, our experts at Hawke Media have gotten really good at attracting new visitors to your site, app, subscription, etc. by focusing on attracting the right demographics and pursuing the ones most likely to convert.

What Is User Acquisition?

User acquisition (UA) is the process of gaining new users, typically for an app, website, or other type of service. The goal of a user acquisition campaign is to build an audience through marketing-driven activity.

Unlike traditional strategies, most user acquisition approaches today focus on using data-driven ad campaigns.

The goal of user acquisition is to convert users into customers. A user becomes a customer upon the completion of their first transaction. That process brings up another term — customer acquisition — which happens upon the user’s first transaction.

If your goal is customer acquisition, you have to start with user acquisition.

Examples of User Acquisition Becoming Customer Acquisition

Here are some ways a user can be converted into a customer:

An OTT (over-the-top) media streaming service acquires a user by offering a free trial; when a paid subscription is purchased, that user becomes a customer.
A news app is downloaded by a user; when that user opts in for premium content, the leap is made from user to customer, which is known as mobile user acquisition.
A gaming platform (it could be an app, online, or via a console) allows free play; when an in-app purchase occurs, the user is now a customer.
When an account is created for an e-commerce site, that account owner is a user; when the first purchase is made, that is customer acquisition.

Note that with each of those examples, the user was initially brought to a different medium. You need to customize your UA approach depending on your platform.

What Is the Importance of User Acquisition?

The most obvious benefit of user acquisition is that it increases the chance of new customer acquisition. However, there are plenty of other benefits even before that.

Heightened brand awareness. It’s a crowded world out there, and your brand is just one of the thousands jockeying for position. Whether it’s a competitor who offers a comparable product or service as you, or one after the same elusive disposable income, everybody out there wants all the user eyeballs and wallets they can grab. You want your brand to stand out from the others and be top of mind.

Maintenance, growth, and expansion of the business. Nothing lasts forever, and this is especially true of today’s fickle customers. Customers move away, grow out of the demographic, or just plain move on, and somebody has to take their place. Despite the oft-repeated claim, “my company has no direct competitors,” all companies do. Landing new customers will do exactly what is stated here — maintain (worst-case scenario) or, optimally, grow, and expand the business.

How Is User Acquisition Measured?

How much user acquisition costs your company is a key figure to be aware of — as is whether that price is worth it. Two important figures, the customer acquisition cost (CAC) and the customer lifetime value (CLTV), are crucial KPIs to understanding how successful your marketing budget is and whether the investment you’re making is worth it.

There are three ways to understand the impact of user acquisition on your business:

Customer Acquisition Cost (CAC)

This formula takes the total of your sales and marketing expenditures on user acquisition and divides that by the number of new customers you’ve acquired. If you spent $25,000 in the previous quarter and gained 33 new customers, your CAC is $25,000 (sales and marketing costs) ÷ 33 (number of new customers) = $757.58.

Total Sales & Marketing Expenses on User Acquisition / # of New Customers Acquired = CAC

Customer Lifetime Value (CLTV)

This calculation allows you to figure out how much revenue you can expect from new customers over their association with your company. The formula is:

Average Sale x Number of Repeat Sales x Average Customer Life Span = CLTV.

The CLTV should be a bigger number than the CAC — at least three times (or more) larger. If your CLTV is lower than that, it means it isn’t worth it to bring these new customers on board. (Or that your pricing structure needs to be looked at.)

User Retention Rate (Also Called Churn)

Your customer churn rate is an indication of how your company is handling customer retention. As mentioned earlier, there are always customers who jump ship for a number of reasons. A few of the most common are outlined below:

Change in financial status
Change in geography or living situation
Unhappiness with the product
Loss of interest in the product (or brand overall)
Loss of interest in the brand overall
Change in life status (i.e., a young family “outgrowing” a brand like Pampers as children age)

There are two formulas here you should pay attention to:

Customer churn rate. This gives a snapshot of how your company is doing in customer retention. For example, if you’re calculating the customer churn rate for Q2, the formula is:

Number of Customers Lost During Q2 ÷ Total Number of Customers at Start of Q2 = Customer Churn Rate.

Revenue churn rate. Knowing the financial impact of churn is vitally important, so you need a formula that calculates it. The revenue churn rate measures the impact of customer churn. Using our Q2 example, the formula is

Total of Recurring Revenue Lost in Q2 ÷ Original Total of Recurring for Q2 = Revenue Churn Rate

Of course, you can make all sorts of calculations from churn, including whether the customers lost were ones who were worth focusing on, and if so, what can be changed to retain those types.

User Acquisition Strategy

By implementing effective strategies to reach potential customers, businesses can increase their customer base, boost sales, and ultimately achieve their business goals.

Advertise on proper channels such as social media platforms and search engines. You may need to add new channels to your media services to reach the right people.
Use targeted ads to reach audiences who are more likely to be interested in your products or services.
Track analytics to determine which channels and campaigns bring in the most traffic and conversions.
Optimize ad spend and target similar audiences through lookalike audience features.
Conduct proper demographic research to ensure that ads are being shown to the right people.
Identify age range, gender, interests, and location of potential customers to tailor ads effectively.

Tracking all this data will give you several key insights: how successful the sales team is in landing new business, how the marketing department is handling pricing, how customer service is working with retaining customers and, in the big picture, and how current and potential customers perceive your company and its offerings overall.

Grow Your Experience

To gain new customers for your platform, a user acquisition strategy is vital. Knowing the particulars of the user acquisition process will ensure that your business continues to grow both its customer base and revenue. Plus, having a grip on the financial side of the user acquisition process will help your brand welcome new customers — the right ones, who will help your company thrive.

Ready to take your user acquisition marketing to the next level? Reach out for your free consultation with Hawke Media’s digital marketing experts today.