Developing a highvalue customer acquisition strategy

From: alexhormozi

This article explores key elements in developing a high-value customer acquisition strategy, drawing insights from a consultation with Ashley Caps, founder of AC Styles, a personal styling service, and Alex Hormozi of acquisition.com. The core challenge for AC Styles was a need for consistent lead flow to scale beyond its current annual revenue of $309,000toagoalof$5 million [00:01:14].

Understanding the Business Foundation

AC Styles is a professional wardrobe and personal styling service that aims to transform clients’ confidence and save them time [00:00:25]. The business operates with approximately $309,000inannualrevenueand$130,000 in profits, yielding about a 42% net margin [00:00:35]. In four years, it has served over 1,000 clients [00:00:45].

A crucial metric for AC Styles is its customer economics:

• Customer Acquisition Cost (CAC): A blended CAC of $600 [00:06:58].
• Lifetime Value (LTV): $10,000 annually [00:07:00].
• LTV:CAC Ratio: A strong 16:1, indicating a very healthy business model where every dollar spent on acquiring a customer generates $16 in return [00:07:02, 00:33:58].
• Churn Rate: Extremely low at 2.5% annually (only one customer churned out of 40 in the last year) [00:07:13, 00:07:17].

This strong foundation, characterized by profitable core economics, good “stick rates” (customers wanting to keep paying), and high referral rates, signifies that the primary focus for growth should be on increasing lead volume [00:06:31, 00:06:44].

Targeting High-Value Customers (Avatar Clarity)

AC Styles serves a luxury clientele, often individuals in their 40s to mid-60s who highly value their time and expertise [00:00:58, 00:01:20, 00:01:30]. These clients typically have a minimum annual income of $1million[00:09:51].Thetotalinvestmentfortheservice,includingclothing,canbearound$40,000-$50,000,oratleast$25,000 for the service itself [00:09:58, 00:10:04]. Ashley intentionally targets these high-income earners and does not compromise quality for lower-end customers [00:10:17].

Key customer “avatars” that Ashley enjoys working with include:

• Stay-at-home moms who are frequent travelers, with kids, and have many social events [00:16:32, 00:16:50].
• Male CEOs [00:17:07].

Common triggers for these clients to seek styling services include:

• Post-baby body changes for women [00:10:54].
• Divorce for both men and women [00:10:58].
• Desire to start dating [00:11:01].
• An image that doesn’t match their executive status [00:11:04].

The current service phases include:

1. Onboarding Phase: A style assessment to establish a baseline, followed by a closet “gutting” and new outfit procurement over 60 days, priced at $8,500 [00:01:43, 00:02:01, 00:03:26].
2. Ongoing Styling: Monthly sessions at $2,000permonthorquarterlyat$4,500 per quarter [00:02:14, 00:03:31]. AC Styles also earns about 10% commission from clothing vendors [00:03:36].

Ashley recently streamlined her offerings to focus solely on the luxury tier, recognizing it yields more revenue [00:03:46].

Optimizing Paid Advertising Funnels

AC Styles currently uses Google AdWords and Thumbtack, spending about $300 per month on each platform [00:03:59, 00:04:03].

Google Ads Performance

• Annual Spend: $3,400 (for 2024) [00:07:38].
• Cost Per Click (CPC): $1.89 [00:07:41].
• Total Clicks: 1,800 [00:07:44].
• Total Sales: 8 [00:08:05].

The primary issue identified is a conversion problem: 1,800 clicks only resulted in 8 sales, indicating a huge leak in the funnel [00:08:07]. The current landing page requires direct scheduling of a call and does not show prices or offer an incentive for prospects not immediately ready to buy [00:07:45, 00:07:50, 00:08:00].

Proposed Solutions for Paid Ads:

1. Implement a High-Value Lead Magnet: Instead of immediately pushing for a sales call, offer something valuable, risk-free, easy, and fast [00:19:07, 00:20:37, 00:22:10]. Examples include:
   • “Your ideal colors” based on complexion [00:19:59].
   • “How to best use your existing closet” [00:28:23].
   • A personalized style assessment (even if it’s a glorified sales call) [00:24:26, 00:19:24]. This allows capturing prospects who are not immediately ready to buy, potentially increasing lead flow by 2-5x [00:21:41, 00:55:03]. A good benchmark for opt-in pages with qualified traffic is 20-50% [00:23:19].
2. Pre-Qualify Leads: Include budget, authority, need, and timing (BANT) questions on the scheduler or opt-in form [00:26:23, 00:31:39]. This “good friction” helps filter out unqualified leads, saving time for the sales team [00:27:35, 00:32:38, 00:32:50]. For unqualified leads, provide an automated freebie [00:29:03].
3. Video Sales Letter (VSL): Place a video on the landing page before the scheduler to pre-sell prospects and answer common questions [00:21:50, 00:25:54, 00:50:42]. A second video can be sent between booking and showing up for the call to further presale [00:25:23].
4. Increase Ad Spend: Once the funnel is optimized, the business should significantly increase its ad spend. With a 16:1 LTV:CAC ratio, every dollar spent on ads generates $16[00:33:58].Currently,$3,400 annual spend yields $78,000inincome,highlightinguntappedpotential[00:34:45,00:34:54].Doublingortriplingthecurrentadspend(from$300/month to $600-$900/month) would directly increase volume [00:51:27, 00:51:51].

Leveraging Affiliates

Affiliates are independent businesses that refer customers in exchange for compensation [00:11:43, 00:11:56]. AC Styles currently generates about a third of its revenue from six affiliates (four matchmakers and two private social clubs) [00:04:19, 00:12:01, 00:12:40, 00:12:51]. These relationships were established through manual email outreach [00:36:32, 00:36:35].

• Remarkable Efficiency: Ashley closed 6 affiliates from only about 40 outreach attempts, resulting in roughly $2,500 in annual revenue per email sent [00:37:18, 00:37:53, 00:38:22, 00:38:31]. This efficiency is 10-15 times higher than typical cold outreach response rates [00:38:08, 00:38:11].
• Compounding Acquisition: Affiliates provide consistent, recurring traffic sources [00:13:30].
• Activation Strategy: Ashley maintains these relationships by hosting events with individual companies, ensuring continued referrals [00:43:08, 00:43:21]. Their clients benefit from makeovers, leading to better dating profiles and matches, creating a win-win [00:42:43].

Proposed Affiliate Growth Strategy:

• Scale Outreach: Increase email outreach to potential affiliates. A target of 20 emails per day is suggested, which could lead to 60 affiliates and a 10x increase in revenue from this channel alone [00:39:10, 00:40:05, 00:52:06].
• Targeted Affiliate Types:
  • High-end trainers/physical therapists [00:40:30, 00:40:31].
  • Executive coaches [00:40:34].
  • Dating coaches/matchmakers [00:40:37].
  • Divorce attorneys [00:40:47].
• Finding Affiliates: Use Google, social media, and potentially list brokers to find contact information [00:40:51, 00:40:56, 00:40:58].

Ensuring Customer Continuity (LTV)

AC Styles has a high customer retention rate, with minimal churn [00:07:17, 00:47:13]. The current ongoing pricing model includes monthly and quarterly options, with most older clients grandfathered in at $1,500monthlyorquarterlyrates,whilenewclientspay$2,000 monthly or $4,500 quarterly [00:46:27, 00:46:50, 00:48:00]. This blend effectively serves as a price anchor, making the quarterly option more appealing [00:47:44]. Given the low churn and healthy existing LTV, significant changes to the continuity model are not immediately recommended to avoid overwhelming the business [00:48:13, 00:48:27, 00:48:47].

Strategic Prioritization for Growth

The proposed order of actions is designed to maximize impact with minimal initial effort:

1. Implement Video Sales Letter and Lead Magnet: This is a low-effort, high-impact change that can significantly increase lead flow [00:50:42, 00:52:40, 00:54:54, 00:55:01].
2. Improve Attribution Tracking: Essential for understanding which ad sources are truly effective and ensuring that spending is not done “in the dark” [00:54:28, 00:54:32].
3. Increase Ad Spend: Once the funnel is optimized and tracking is in place, scale up Google ad spend to leverage the strong LTV:CAC ratio [00:51:22, 00:52:48].
4. Scale Affiliate Outreach: Systematically expand the affiliate program, dedicating time and effort to consistent outreach and relationship management [00:52:06, 00:53:02].

These steps, particularly optimizing the ad funnel (2-5x lead flow) and scaling the affiliate program (3x revenue), are projected to take AC Styles from $309,000toapproximately$3.6 million in annual revenue, representing a 12x increase [00:55:25, 00:55:31]. This phased approach ensures that quick wins are capitalized on before moving to more intensive, but highly rewarding, initiatives. These marketing and customer acquisition strategies and innovative customer acquisition strategies focus on leveraging existing strengths and scaling what’s already proven successful.