3 Ways to Cut Your Customer Acquisition Costs in Half
Content was originally published on Inc.com on July 3, 2019.
Over the last twenty five years I have helped thousands of business owners develop and fine-tune their sales funnels. Whether it be pricing challenges, closing tactics or choosing the right salesperson for the job, there are many ways to increase sales within your company. But the one thing that many business owners fail to look at, is there customer attrition rate.
You most likely have an idea on what it costs to acquire a new client. Depending on your industry and price point this can range from a few dollars to several hundred dollars. You can calculate your customer acquisition cost by dividing all the costs spent on acquiring more customers (ie. marketing expenses) by the number of customers acquired during that same period. So if you spent ten thousand dollars last year on marketing and then brought on five hundred new customers, the acquisition cost would be twenty dollars a client.
But what if you were able to keep that client for a second year or a third? The cost of keeping that client happy is much lower in the long run than going out and finding someone new.
Here are my tips on how to keep your customer attribution low and profits high:
Look For Patterns
When it comes to losing clients, there is almost always a pattern surrounding their decision. And if you are able to 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 ninety 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.
We have had some clients have great luck with setting up “timed gifts” at known drop points.
Invest In the Relationship
Brand loyalty goes a long way in today’s market. So if you want to keep a customer for the long term, take the time to deepen the relationship and get to know your customers. Share information and get to know what makes them tick. Make an authentic connection. The more intertwined you are in their lives- both in business and personally the more indispensable you will become.
Increase Your Value
This doesn’t always mean an increase in prices. As your relationship grows and develops, your customers needs will change as well. 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.
A little more time and attention will go a long way to keeping our customer attrition rate low and our profits high.