Three Ways To Reduce Customer Acquisition Costs
It costs money to acquire a new client. Depending on several factors, this cost can range from a few bucks to several hundred dollars. To calculate customer acquisition cost, you divide all the costs of acquiring more customers, such as marketing and advertising expenses, by the number of customers acquired during that period. For example, if you spent $10,000 on marketing last year and acquired 500 new customers, your acquisition cost would be $20 per client.
What if you could keep each client for a second year or a third? David Finkel, author and the owner of a business coaching company, reminds sales professionals that the cost of keeping a current client happy is much lower than finding a new client. We share his tips for keeping customer acquisition costs low in this issue of Promotional Consultant Today.
1. Look for patterns. When it comes to losing clients, Finkel says there is almost always a pattern. If you can analyze the data, you can find the key drop points in your funnel and work towards patching them up. For instance, do you tend to lose clients at the start of your relationship? Perhaps you need a better onboarding process to educate your customers on what to expect. If you lose them after 90 days, you may need to work on customer communication and engagement. If it happens after a year, you might need to come up with add-on products or service to grow with your customer base. Wherever you see the pattern, you can then work on tightening up the funnel.
2. Invest in the relationship. Brand loyalty goes a long way in today's market. If you want to keep a customer for the long term, take the time to deepen the relationship and get to know your customers. Finkel advises sales professionals to share information and get to know what makes their customers tick. Make an authentic connection. The more intertwined you are in their lives, the more indispensable you will become.
3. Increase your value. Adding value can keep customers happier in the long run. As your relationship grows and develops, your customers' needs will change. So, one way to decrease your drop rate is to negotiate a longer contract term with added features or services. If you are focusing on developing a deeper understanding of your customer base, you should have a good idea of what they are looking for in future products and services, so use that to your advantage here.
Rather than continually investing time and energy recruiting new customers, use the tips above to keep your current customers happy. A little time and attention go a long way at keeping customer attrition rates low.
Source: David Finkel is co-author of Scale: Seven Proven Principles to Grow Your Business and Get Your Life Back. Finkel's weekly business owner e-letter is read by 100,000 business owners around the world. Finkel is the CEO of Maui Mastermind, a business coaching company.