User acquisition is a term that describes the strategy and processes businesses apply to get new people to buy their product, use their app, or register for their service.
Businesses use a variety of methods to try to get as many users as possible to sign up. For example, a company will develop advertising campaigns, promotions, and rewards that are focused on attracting new users. Getting more users on board will help the business to accelerate growth and perform better.
What is user acquisition?
User acquisition is all about getting more users – typically for apps, platforms, and services.
The purpose of user acquisition is to keep a steady flow of new users and revenue for the business. User acquisition involves using one of the following methods to attract new users:
- Online advertising – display ads, paid search (pay-per-click or PPC), affiliate ads, social media ads, etc.
- Email outreach – building email list subscribers and nurturing sales
- Website – using blog posts and other website content to attract and convert new users
- Events – communicating with potential users through webinars or live events
- Influencer marketing – hiring thought leaders or ambassadors to promote the brand and offer direct sign-up links
- Social media – producing content and conversations to organically attract and convert new users through social media channels
- Referrals – encouraging existing customers to recommend your product or services.
Why is user acquisition important?
User acquisition is essential for most modern business models as it helps companies to increase their customer base and maximize their revenue.
Setting out a comprehensive user acquisition, implementing it carefully, and measuring the results is a big factor in maintaining long-term success, especially for app and digital services businesses.
Measuring user acquisition accurately enables businesses to analyze which advertising and marketing approaches work best to gain new users and optimize their processes.
How much does user acquisition cost?
The cost of user acquisition can vary greatly depending on the type of product or service, industry, target audience, and the specific acquisition strategy being used.
For example, the cost of user acquisition through paid channels such as Google AdWords or Facebook Ads can range from a few cents to several dollars per user. The actual overall cost depends very much on the advertiser’s budget and the quality of the ads.
What are the KPIs for user acquisition?
The main KPI for user acquisition is CPA which stands for cost per acquisition. CPA is calculated by dividing the total overall cost of the acquisition campaign by the number of users acquired.
Other related KPIs include:
- Return on investment (ROI): Calculated by taking the revenue generated from acquiring new users and dividing it by the cost associated with acquiring those users. Allows companies to see how successful their strategies were in driving growth.
- Conversion rate: Measures the percentage of visitors to a website or app who take a desired action, such as signing up for a service or buying something. Gives businesses insights into which campaigns lead to direct acquisition and revenue generation.
- Retention rate: Calculated by taking the number of users at the end of a period, dividing by the number of users at the start of a period and multiplying by 100. It gives an indication of how successful companies were in retaining the customers they acquired.
- Customer lifetime value (CLV or LTV): The most common way to calculate CLV is to take the average revenue per user (ARPU), multiply it by the gross margin, then divide by the churn rate. CLV helps to inform marketing spend decisions, gain insights into customer behavior patterns, and direct future investments.
- Funnel conversion rate: Calculated by dividing the number of users who complete that stage by the number of users who entered that stage and multiplying by 100. For instance, if 1000 people click on an ad, but only 10 people convert, you divide 10 by 1000 which is 0.01, then multiply by 100 to give you 1%. A low rate in one funnel section may indicate users are getting stuck and that particular segment may need more attention from marketers.
- Net promoter score (NPS): The NPS value is usually gained from carrying out customer satisfaction and loyalty surveys. NPS is a key marker of how well a business is driving growth and can be used as a benchmark to measure performance over time.
- Engagement: Engagement KPIs include click-through rate (CTR), time on site, bounce rate, social media engagement, email open rates, and more. Engagement is crucial for maximizing user acquisition, so these KPIs should be monitored closely.
How to improve user acquisition
An effective way to improve user acquisition is to pay close attention to KPIs and identify which acquisition methods lead to the highest CPA and aim to bring this value down. In doing so, you should also increase your ROI.
Some examples of how to reduce CPA include:
- Optimize landing pages: Apply a simple and clear design with prominent call-to-action buttons. Improve the copy to be more persuasive and demonstrate social proof such as testimonials and reviews. Make sure the page loads quickly to minimize bounce rate. Make sure your pages are optimized to display correctly on mobile devices.
- Target specific audience segments: Segment your market into demographic (age, gender, location, etc), behavior (browsing history, interests, actions), and psychographic (values, attitudes, personality, lifestyle) groups then create ads and content to appeal to the individual groups that are most likely to convert.
- Improve ad quality: Make your headlines attention grabbing and compelling. Use high-quality images or videos to make a good impression. Include a strong call-to-action to get more users to sign up or buy.
- Produce more engaging SEO blog content: Blog posts are one of the best and cheapest ways to attract new users and encourage them to convert. Focus on using the right keywords and phrases, but also make the content interesting and easy to read. Make sure that all the technical SEO aspects are taken care of – meta tags, backlinks, etc.
- Use A/B split testing to improve ad performance: Identify the elements you want to test, such as headline, copy, layout, call-to-action buttons, etc. Next, create a control version of the ad or content (the ‘A’ version) and a variation that you want to test (the ‘B’ version), that has a single element changed. Decide how big your sample should be to get meaningful results, then run the test. Monitor the key metric, such as click-through rate, bounce rate, and conversion rate. Analysis of the results will reveal which is the winning version and you can make a decision whether to stick to the original or switch to the variation.
- Apply a retargeting strategy: Capture user data through the use of pixels, cookies, or other tracking techniques and use this to create retargeting lists of people who engaged with your brand. Next, create some retargeting ads based on what the data reveals about the behavior and interests of those users. You can also apply dynamic ads that show specific products or services to specific users. Monitor the results and adjust accordingly.
- Identify behavior patterns and trends: You can improve messaging and targeting by collecting data on user behavior and creating heatmaps to show where users scroll and click. You can also apply cohort analysis that tracks user behavior over time and how it changes. Machine learning tools can also be applied to help you spot patterns and trends that may not be immediately obvious.
- Monitor and adjust your strategy regularly: Successful user acquisition relies on being adaptable to change. Customer habits and behavior patterns change quickly in the modern age and you need to change with them. Make sure that you monitor the success of your user acquisition strategy at regular intervals and redirect it if necessary. Additionally, you should always keep an eye on the latest developments, tools, and technology that are available to help improve your results.