Customer Acquisition

Graphics courtesy of Marketing Insider GroupOpens in new window The focus of this post is customer acquisition, the first stage of the customer lifecycleOpens in new window.

New customersOpens in new window have to be acquired to build companies. Even in well-managed companies there can be a significant level of customer attritionOpens in new window. These lost customers need to be replaced. We look at several important matters for CRM practitioners:

• which potential new customers to target,
• how to approach them and
• what to offer them.

In the context of customer relationship management (CRM)Opens in new window, one should acquire customers that have a strong important goal during new product launches and with new business start-ups.

For small businesses with ambitions to grow, customer acquisition is often as important as customer retention. A one-customer company, such as BICC (now part of Balfour Beatty plcOpens in new window) that supplied copper cable to a single customer, British Telecom (BT)Opens in new window, could double its customer base by acquiring one more customer. On the other hand, the loss of that single customer could spell the end of the company.

With such high stakes, all too often companies feel compelled to acquire as many new customers as possible only to find out that they face problems of retention, service demands that they cannot manage and low margins. Acquiring profitable customers, as measured by customer lifetime value (CLV)Opens in new window, should be the goal of CRM strategyOpens in new window.

Even with careful targeted and well-developed and implemented customer retention plansOpens in new window, customers still need replacing. In a business-to-customer (B2C) context, customers may shift out of a targeted demographic as they age and progress through the family lifecycle; their personal circumstances may change and they no longer need and find value in your product; they may even die.

In a business-to-business (B2B) context, you may lose corporate customers due to merger and acquisition by another company with alternative supplier preferences; they may have stopped producing the goods and services for which your company provided input; they may have ceased trading.

Customers lost to these uncontrollable causes indicate that customer acquisition will always be needed to replace natural attribution.

A number of important questions have to be answered when a company puts together a customer acquisition plan. These questions concern targets, channels and offers as below:

1. Which prospects (potential new customers) will be targeted?
2. How will these prospects be approached?
3. What offer will be made?

These issues need to be carefully considered and programmed into a properly resourced customer acquisition plan.

Many marketing plans do not distinguish between customer acquisition and customer retention. Few consider lifetime value as a useful guide to customer acquisition, and often customer acquisition and retention are managed in different parts of the business, which runs the risk of recruiting customers who have little chance of becoming profitable. Acquisition should be guided by the same CLVOpens in new window considerations that underpin retention strategies.

Networking, a crucial technique of customer acquisition, can be defined as follows:

A network might include members of a business association, chamber of commerce, friends from university or professional colleagues in other companies. In some countries it is essential to build and maintain personal networks.

Much professional networking is now done online in social media such as LinkedIn. In China, for example, the practice of guanxi, means that it is well nigh impossible to do business without some personal connections already in place.

Referral networks are common in professional services. Accountant, banks, lawyers, auditors, tax consultants, estate agents will join together in a cross-referral network in which they undertake to refer clients to other members of the network.

Promotional activities can also generate useful leads. Exhibitions, seminars, workshops, trade shows and conferences can be productive sources. Companies that pay to participate in these events may either be able to obtain privileged access to delegate and attendee lists, or to generate lists of their own such as a record of visitors to their own stand at a trade show.

B2B marketers generally do little advertising, though this can generate leads. B2B advertising is generally placed in highly targeted specialist media such as trade magazines.

An important activity for some B2B companies is publicity. Publicity is an outcome of public relations (PR) activity. Publicity can be defined as follows:

Successful PR can generate publicity for your product or company in appropriate media. This coverage, unlike advertisingOpens in new window, is unpaid. Though unpaid, publicity does create costs. Someone has to be paid to write the story and submit it to the media.

Many magazines, trade papers and online communities are run on a shoestring. They employ very few staff and rely heavily on stories submitted by companies and their PR staff to generate editorial matter.

Editors are always looking for newsworthy items such as stories about product innovation, original customer applications or human interest stories about inventors and entrepreneurs. Editorial staff generally will edit copy to eliminate deceptive or brazen claims.

A growing number of B2B companies use email for new customer acquisition. Email offers several clear advantages. A very large proportion of business decision makers have email, although this does vary by country and industry. It is very cheap, costing just about the same to send one thousand emails as it does to send one single email.

It is quick and simple for recipients to respond. Content can be personalized. Production values can be matched to audience preferences: you can use richly graphical or simple textual content. It is an asynchronous prospecting tool. In other words, it is not tied to a particular time frame, like a sales call. Email messages sit in mailboxes until they are read or deleted. It is a very flexible tool that can be linked to telesales follow-up, ‘call-me’ buttons or click-throughs.

When email is permission-based, response rates can be extraordinarily high. On the other hand, there is growing resistance to spam email. Emails are spammed when they are sent to large numbers of recipients who have not been properly screened. What is spam to one recipient may be valuable information to another. An important ingredient in email marketing is a process by which prospects are encouraged or incentivized to provide email addresses for future contact.