Reducing customer acquistion costs can be tricky...
The issue of controlling and reducing customer acquisition costs can be a tricky one, especially for small business, because there tend to be two schools of thought around what the costs are. Some feel that any cost associated with a customer—and that can be almost every cost in a small business—should be considered. Others fall in the camp that those expenditures are geared specifically to what it takes to bring people in the door.
Nalin Jain, Director of the Arlington Small Business Development Center at George Mason University, subscribes to the former view. “Isn’t the whole purpose of a business to have customers?” he asks. ”So, from this perspective, all business operating and financing costs can be termed customer acquisition costs. Even when you give to charity, it is usually with the deeper purpose of ‘buying’ social goodwill, which, in turn, helps acquire customers.”
In that sense, he says, automating certain tasks related to customer management and development can leave you more time to sell yourself and grow the business. “Automating customer service management can help a great deal,” he says. “Using contact management software, which helps you understand your customers’ history, likes, dislikes, etc., can help you more quickly reach the customers who buy more often. Even your phone offers an opportunity. Services exist that allow you to create an automated FAQ list that can quickly answer prospects’ and customers’ commonly asked questions, or you can simply refer them to an FAQ list on your website in your incoming message.”
“There are a number of things that aren’t core to your business that may be done more efficiently and, given the time it takes, more cost-effectively.”
—Nalin Jain, Director, Arlington Small Business Development Center
Jain also suggests offloading tasks unrelated to customer development. “There are a number of things that aren’t core to your business that may be done more efficiently and, given the time it takes, more cost-effectively. Think about the time you spend on payroll, especially if you use a lot of contractors, as many small businesses do. Outsourcing tasks like that free you up.”
Jere Doyle, President and CEO of Prospectiv, a marketing solutions firm, feels that customer acquisition costs are those related specifically to what you incrementally spend to land new customers. “Once you figure out what those costs are, you can start analyzing media and programs and determine what works,” he adds.
For Doyle, those costs are also related to targeting, as sending the right message out to the right potential prospects can help keep you from casting too wide a net—trying to be all things to all people—thus spending more than you have to on marketing and advertising. “Overall, the keys to reducing customer acquisition costs are testing and tracking,” he asserts. “The latter—analyzing what customers are buying, how often they buy, how people learned about you, etc.—certainly takes time, but your conversion rate will be so much higher that you’ll be far ahead on revenue at the end of the cycle.”
Regardless of the medium you use, Doyle notes, tracking and measuring response is critical. If you offer any type of coupon, for example, always include a tracking number somewhere so that you can gauge the success (or failure) of that particular campaign. Communicate at the point of sale—make sure you or your staff are constantly asking customers about how they heard about you. “The web has been particularly helpful in that regard,” he adds. “It’s made it extremely easy to reach a broad market and then track not only what people are buying, but what offers and parts of your site interest people most. The point is that once you have that customer tracking information in hand, you can purchase media and develop campaigns much more cost-effectively.”
In regards to testing, Doyle advises constantly trying new things. “Don’t be afraid to test new areas and media channels,” he says. “Write new copy, test a range of offers for your products and services and create different bundled promotions. Testing and tracking are the building blocks for effective targeting and, at the end of the day, delivering more customers that buy.”
Article originally published in Wells Fargo Small Business Roundup
For more information, visit the Arlington Small Business Development Center website