Customer acquisition is no longer simply about quantity. Companies must now focus on customer quality to differentiate themselves from the competition and generate profitable growth over the long-term. In order to ensure customer quality, companies must invest in the satisfaction and success of their customers. A mutually rewarding relationship with your customers is based on enduring loyalty and commitment.
Too often, companies devote intensive resources to acquire customers and, as a result, experience stunning short-term growth. This then leads to early churn of newly acquired customers just as rapidly when the hidden costs of poor customer quality become clear. Companies in the telecom and banking industries have been historically prone to this strategic mistake.
It is increasingly important to keep in mind that customers acquired today will shape the future of a company, driving key financial metrics such as average revenue per customer, average monthly recurring charges and customer lifetime value. It is critical to ensure that customers being targeted for acquisition are contributing optimally to a company’s growth plan.
Critical Success Factors
Consider the Critical Success Factors associated with acquiring desirable customers:
- Assess the quality of new customers. It’s important to analyze the growth potential and model the lifetime value of prospective customers. This ensures that customers being pursued are highly profitable and likely to remain loyal.
- Develop an appropriate growth path for new customers. Customers follow different patterns of behavior and have different needs and preferences. It is important for companies to continually analyze their acquisition processes to obtain and grow each customer optimally.
- Know where to draw the line with prospects. Not all prospects are desirable customers. It is important to understand the payback periods, return on investment and impact of different customer groups on a company’s financial measures. Being able to model the likely impact of various acquisition plans ensures that companies are laying the foundation for a stronger customer base and enduring growth.
Customer Chemistry’s Approach
When companies emphasize quantity over quality, they can put customer volume before customer value. And often the result is higher churn, lower customer loyalty, and sub-optimal customer lifetime value.
Customer Chemistry specializes in helping companies develop the marketing insights necessary to intelligently acquire optimal customers. Our Marketing Performance Improvement framework provides the foundation for companies to better understand individual behavior from millions of targets, optimizing acquisition efficiency and effectiveness. Marketers can leverage our framework to acquire loyal customers and maximize financial returns.
The example below provides a comparison of how Customer Chemistry’s Marketing Performance Improvement framework optimizes acquisition potential. In this example, the greatest return can be realized by acquiring the top 20% of the available population, or 1,000 customers. By applying Customer Chemistry’s analytics in this example, results are optimized by intelligently targeting the most desirable prospects through the proper offer and channel.
| Variable | Typical Approach | CC Approach |
|---|---|---|
| Targeted Prospects | 5,000 | 1,000 |
| Average Profit per Customer (monthly) | $6 | $9 |
| Lifetime Estimate (months) | 12 | 16 |
| Discount Rate | 10% | |
| Expected Future Profit per Customer (NPV) | $68.25 | $134.29 |
| Average Cost to Acquire a Customer | $82 | |
| Simple Payback Period (months) | 13.7 | 9.1 |
Expected Lifetime Profit |
($13.75) | $52.29 |
Customer Chemistry draws on proven business expertise, deep industry experience and winning practices in marketing analysis, predictive analytics and execution to help our clients optimize profitable growth. If you are exploring ways to profitably drive customer acquisition, contact one of senior client representatives today at 571-643-0840.