The new frontier of customer acquisition

With the recent data privacy changes, there has been a huge shift in the way companies can collect data to target their customers. It has become increasingly difficult, time consuming, and expensive for direct-to-consumer (DTC) retailers to acquire customers using paid ads on Facebook and other third-party channels.

And while it was predicted that 40–75% of consumers would opt out of data tracking, that number is shaping up to be a lot higher—96% of users are opting out, according to recent data.

Sales generated from third-party advertising can expect to see a substantial cut as well. According to a Facebook ad published in the Wall Street Journal, an average small business advertiser may see “a cut of over 60% in their sales for every dollar they spend.

Those small companies must now look for new ways to reach customers to increase retention, while expanding their audience.

“The future of acquisition has less to do with finding pockets of people that don’t know you—and letting people who do know you, find people that they know,” Jake Cohen, Klaviyo’s Vice President of Content, explains. “It’s a way to establish a better quality connection from the beginning.”

You can tap into your existing network by offering loyalty programs that include referrals and sweepstakes and encourage the creation of user-generated content. Strengthening customer loyalty and building brand advocacy is critical to expanding your customer base in 2022 and beyond.

Access your customers’ networks with referral programs

Referral leads generate 30% more conversions than leads gained through other marketing channels, according to data from Invespcro. But customers who are referred by other customers have a retention rate that is even higher—37%.

Referrals are a cost-effective way for you to tap into your existing customer networks to connect with new prospects. Use incentives to motivate existing customers to act as brand advocates on behalf of your company and spread their appreciation for your brand to their family and friends.

Julep, a consumer beauty brand, runs a successful referral program. In its Julep Maven program, customers receive a $15 credit when a friend they referred joins the Maven program. And the friend they referred gets a tempting treat of their own—a free Julep beauty box. 

Julep’s referral program turns its best customers into enthusiastic brand advocates—and these customers are excited to recommend the brand to their family and friends. 

In Julep’s monthly “pick your box” promotion, customers receive an email to choose the beauty products they want, along with an option to refer a friend. If that friend joins Julep, the original customer will be rewarded with a $15 credit. The success of this promotion has led Julep to enjoy five times the number of shares that it usually sees. 

Kids’ clothing brand Hanna Andersson has also seen success with its referral program. Customers who referred a friend earned a 20% discount after their friend placed their first order—and that friend also received a 20% discount. The program had a 20% conversion rate and resulted in the brand reaching 25% of its customer acquisition goals over the course of two months. 

“These referral programs work because the focus is on building relationships with people who buy more than once,” Cohen explains. 

“The magic of referral programs is that you’re working with people who already know and love your brand. It comes down to a math exercise. If your cost of acquisition is $22 and you’re spending $1,000/mo to get 45 customers, how much further could the $1,000 get you in a referral program? You can either offer an incentive that is lower than your cost of acquisition or the same and know that the referrals are boosting loyalty among those who already love you.”

Nurturing your existing customers and enhancing loyalty will turn them into brand advocates who then bring new leads into your community.

Drive brand awareness with giveaways and sweepstakes

Giveaways are one of the top ways to gain new customers. When you incentivize your community to share information about your brand, it naturally leads to greater brand awareness. 

Travelzoo, an entertainment and travel site, ran a campaign that combined referrals with an attractive sweepstakes competition. In its sweepstakes, customers were given the opportunity to win a trip to Iceland by referring new customers to the company. Customers monitored their progress against other Travelzoo members on a leaderboard, where they also referred friends.

The sweepstakes was successful in enhancing engagement with current customers while bringing in thousands of new leads. During the promotion, the brand saw a 25% boost in signups and a 51% increase in advocates, along with a 10% increase in revenue.

Third-party channels offer a powerful avenue to gain new customers through giveaways and sweepstakes. While social networks may not be as effective as they once were for advertising, the platforms make it easy to ask customers to follow your brand or share a post in order to qualify to enter a sweepstakes. 

Incentivize customers to create user-generated content 

User-generated content (UGC) expands your brand recognition, develops customer loyalty and drives increased engagement. Research from Annex Cloud shows that customers are 60% more likely to do business with a site that has UGC, and companies who use UGC on their sites will see an 18% boost to their revenue.

When you offer product samples or other incentives to customer advocates in exchange for product reviews on your site, you encourage customer loyalty. 

Home Depot Canada created a review seeding program, Seeds Sampling, where they gave sample products to a select group of loyal customers in exchange for ratings and reviews on its products. By partnering with these brand advocates, they received more exposure and generated buzz about new products.

The program was particularly effective for Philips WiZ, a brand of smart lighting products that Home Depot Canada carries. Philips WiZ products that were reviewed as part of the review seeding campaign had a 68% higher conversion rate than products that were not included in the program.

“We know that having visual content available for the customer to see is becoming increasingly important to confidence and conversion rates,” Michelle Young, Senior Ecommerce Specialist, User Generated Content, explains. 

And according to their research, existing and prospective Home Depot Canada customers who engage with the brand’s UGS are more than twice as likely to convert.

Enhance customer loyalty to drive growth

Expanding your customer network to grow your company should always be a top priority—not just when a dramatic shift in data collection forces you to reconsider how to gain new customers. It is crucial to turn your customers into passionate brand advocates who will promote your brand to their network. Building this kind of customer loyalty will ensure the growth of your customer base—and the growth of your company.  

Ready for more? Enhance your customer relationships with a loyalty program.

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