The cost of customer acquisition can be shocking – especially for those who sit outside of the marketing realm and aren’t privy to all that goes into obtaining new customers. While customer acquisition values come in around the $10 range for retailers and the travel industry, costs are as high as $150 for the financial industry and a whopping $300 for telecom providers.
Multiply $300 by 900,000 new customers for Verizon Wireless in Q2 and we’re at $270M for just one quarter. That leaves a lot resting on those new customer relationships – and a lot of questions to be answered.
How quickly can you recover the acquisition costs from the new customers? What will be required to secure those customers in a stage of consistent profit? Which customers are of highest value to your business? Which customers aren’t worth keeping?
Although some businesses still correlate high customer acquisition counts with successful marketing, many have shifted their focus to 3, 6, 12 months out. It’s no longer about getting a new customer. It’s about getting a new customer, keeping that customer, and most importantly – expediting the monetization of that customer.
I remember years ago when loyalty programs broke onto the scene. Grocery stores, pharmacies, restaurants, coffee franchises – everyone had the same approach. Purchase a certain quantity, earn a discounted purchase. This method may be effective for garnering loyalty but does it really motivate a buyer to up the ante? Or are you just rewarding ordinary behaviors?
A focus on monetization requires a shift on how you analyze, interpret and engage with your customers. By leveraging historical and predictive analytics, marketers expand their understanding from what’s happening now to identifying ongoing behavioral trends and predicting future needs.
Think about your daily life and the purchases made. Ever noticed the close alignment of the coupons printed during check out with the items you just purchased? Although some may find them usable, many would argue they offer little value. If I just purchased a pack of razor blades, why would I need to repurchase within a few weeks? Instead, could you give me an offer for something I’ll likely purchase later in the month? Or maybe a coupon for the shaving cream I forgot to pick up?
Very basic example but it’s that ability to identify and predict behavioral patterns that allows marketers to engage with customers when it makes sense – and in the most profitable way.
The other element is determining the optimal way to communicate and drive an increase in purchases. We’re all familiar with the ‘sweetest offer’ mentality – especially when it comes to mobile marketing. And although some are convinced that a deep discount or once in a lifetime offer are required for customers to take action, the data often shows otherwise.
Mobile operators offering prepaid services, for example, have learned that a friendly reminder to recharge an account can be just as effective as a reminder with an offer attached. And as you can imagine, eliminating $5 giveaways across a base of 5 million subscribers can have a major impact on a business’ monetization strategy.
Analytics are also helpful in determining which customers are most valuable to the business – in the short and long term. By defining key behavior traits and lifecycle stages among the highest valued customers, marketers are able to devote more resources to further monetizing that VIP base while also identifying and nurturing the ‘next generation’ of VIPs.
There are very few industries – if any – that are on a competitive decline. New players will continue to enter the field, existing players struggling to stay afloat will fight for your customers, and your customers will have more options than ever before.
$300 a pop adds up quick and depending on the industry, some businesses are at risk of losing a customer before ever breaking even. What’s your plan of engagement after acquisition? Are your analytics smart enough to recognize an upsell opportunity at the individual customer level? Are your technologies quick enough to act before the opportunity is lost? What’s your strategy for accelerating the gap between acquisition and monetization?