Managing a Startup Business

If you can’t find a way, then make a way!

Starting a business, any business is a brave step. But how do you manage a start-up business as well as find customers or put in place a customer acquisition strategy on tight or even zero budgets. Working with early stage and start-up companies I know first-hand how limited resources can be. The tendency for many small businesses is to focus on the product. They add in more and more features or take comfort in a well designed website or just even they talk about strategy rather than putting in place a plan to find and sell to customers so the business can getting on track to achieving  business success AKA revenue generation. The below list is some actionable business tactics to get your small business sales pipeline moving and put you on the track to success.

business-startup

Know your Target market – don’t try to sell to everyone

Product to marketing fit is critical to any business success however a business start-up should never try to be a great product to satisfy all buyers’ needs, this will simply not work as no one product will be for everyone. So step 1 is to try to focus in on one customer target group. It will make the business look more focused, knowledgeable, and professional plus it allows the business to channel its efforts into making one target group happy. The key now is to do a customer targeting exercise (figuring out who your customers are and what they want). I am not saying this is easy, especially if your business is new or you only have 1 or 2 beta customers. Brainstorm on what set of buyers or people who might need your product now by matching it back to what problem your product solves, this is sometimes called your USP- unique selling point or Value Wedge. Also check if it is a fluid market (low hanging fruit to be gathered) by doing some Google searches on related keywords. Balance the fact that you don’t want to define your target market so small or so tightly that it’s something people won’t search for. Think in terms of keywords, search terms or existing topics being discussed on forums or industry buzz.

One Swallow does not make a summer

The lesson here is stay focused on executing the business model and don’t get distracted. A good example of this is a company in the SaaS space I work with, received  a phone call from a big company about doing a demo of their product at their offices which would include a customization element. Even though the meeting went ahead, it came to nothing because my client company was not big enough nor could afford to serve companies in the non-SaaS way. They simply were not big enough to fulfil all the product amendments for this one customer or have a dedicated team to work on the project at the stage where they were trying to find the best product to market fit. This distracted the team for over 6 weeks when they could have been doing more productive lead nurturing work.

business-planning

Make a plan

A business plan will at the very least serve as a guide or a roadmap along the way. Too many small businesses talk about being agile or nimble. That is a process or a culture; it is not a business model. What this can often mean is that their limited resources are waiting to respond to the next challenge thrown before them. I am not suggesting that this is wrong as sometimes it is necessary but not all the time so try to build a business plan. The goal is to develop a sound business strategy that provides a reference framework to keep the business on track to grow by building its awareness, developing brand consideration, attracting new customers and closing sales deals.

Tip: Use this Free Business Tools to focus on your business plan to success, time is precious, do not waste it.

Develop a clear brand for your business

A branding is not just for large corporations; from tiny acorns big trees grow! This does not mean spending vast sums on branding but rather it reflects your mission, values and what your product stands for. The major action here is to determine the core attributes of your brand and promote this .Always strive to present your company in the same way, carve out an awareness level on what your brand represents (product innovation, cost leadership, service leadership ) so that it contributes to the overall business in a cost effective way.

Publish great articles

The old adage about content is king is true. Along with being a product or service company also think of your business as a content publishing house. Articles get search traffic via targeted keywords (SEO) but just as important it positions your brand and business as thought leaders. But you have to stand out from the crowd to get attention. Articles need keyword optimised titles PLUS great content, make them factual or research based to further boost readership. No point in publishing articles as a box ticking exercise, make sure the articles you publish are the best so people want to read or download them or don’t bother. Blunt but true.

A few tips on great content angles:

  • Be highly creative or controversial
  • Be the most knowledgeable
  • Have the most research
  • Write strange articles on your industry

Be Social Media Aware.

As a start-up you probably will read loads on inbound marketing, social media or social selling. Being social media aware is more than a few twitter posts or Facebook likes. Every business needs to have a presence and visibility on a variety of Social Media platforms. Create a social media plan (based on article sharing) and then schedule your social media activities so that you build relationships with social influencers, potential prospects, customers and the public. Learn the art of social selling – share to receive.

Keep it lean and mean – know which plates to spin

Like most start-ups you have a lean team so make sure you know what everyone is doing. Who is driving customer acquisition, marketing and sales? Revert back to your plan and prioritise the key initiatives (revenue and product) including major tasks such as content creation, social media interaction and social selling. Time management and knowing which plates to spin can sometimes be complicated for a small business as they dash around from pillar to post. Find and use the right tools, free business tools like Zoho or Trello should save you time or tears. Finally from me to you, a message of sincere best wishes in your business venture. Happy hunting!

Sales Strategy

To have an effective sales strategy a business needs to consider its products, its market and how the sales effort will be directed to ensure it captures profitable growth selling to customers. Sales strategy is a business decision on (1) who the sales teams are going to sell to (2) what are they going to sell them  and (3) how are they going to sell to them?

business-game

Sales strategies ensures market and customer coverage with plans that give the best possible opportunity to win business. In more detail, a sales strategy defines  the customer segments it wants to target(verticals, industries, geographical), the business value propositions for each segment (product, pricing, distribution), how the sales force will be structured (inbound, field, deal value) and the selling processes.

Today’s business is more about “Smarketing” than sales and marketing. Effective business strategy brings marketing and sales together to drive traffic, generate leads, build awareness and improve consideration levels so more customers buy. In a nutshell a good sales strategy will help a business identify and take advantage of the best opportunities available.

Sales strategy Tips.

Business planning

The sales strategy must be based on the business and marketing plans. Outline in as much detail as possible – how will the sales team deliver marketing objectives, plan to target market segments and how will they support marketing activities, such as content marketing or promotional events. Next identify the key aims of the strategy – sell more to the same? Is it about market penetration or market development? Also which target markets you are aiming for and the time, money and resources needed.

Understand the market and find out more about your existing customers or target customer profile. What are their needs, what problems need solving, what products they consider and what they expect from a product or supplier?  Research when, where, how and why the existing customer base buys.  In a B2B sales environment identify who Influences buying decisions both inside the company and on social networks or industry forums. Monitor key trends in the market and social media, trends like market changes and the activities of competitors.  Identify what will be the key drivers for the business that the market will buy.

Pay attention to the cost of customer acquisition and selling costs. List existing customers in order of profitability then create a list of existing, potential and major customers. Always include the total cost of selling to each one by sales channel. Identify the metrics or sales KPI’s that will enable the business to understand what a profitable customer looks like. Now use these profiles to target similar companies. So the sales strategy plan should now be in line with the marketing strategy and the planning should have costs associated to the sales efforts.

Target customers

Business growth depends on acquiring new, profitable business with different customers. Plan how you will approach every new customer. Maybe to win the business of a key customer, you may offer acquisition pricing, creating a loss-leader or maybe giving the product on a trial basis. Make sure you have a plan to move prices and margins back up to a profitable level, or else live with reduced margins from these customers.

For existing businesses develop more business with existing customers. Plan out what you will do to get existing customers buy more and buy different products (‘up-’ and ‘cross-selling’). Plan how to keep retain customers and build relationships. A sales strategy should include a mix of customers, to help safeguard sales revenue. Do not rely too much on one customer, and be aware of potential customer finance problems.

Sales plans should include a balance between time spent developing new business and that spent on existing customers. Forecast and manage seasonal sales or sales cycles.

Reaching the customer

Now that customer target selection has been set, you need to decide which sales channels will be most effective in selling to which customers. Do you sell direct or through channels? Map out the costs of each channel against the benefits it would bring.

Most businesses have a direct sales strategy. Direct sales methods include web, e-commerce, selling face-to-face, direct mail, social selling and telesales. Selling face-to-face is the most expensive sales method, and works well for enterprise high-value sales with a longer sales cycle.

Also, never rule out joining forces with other businesses to boost your sales effort.  For example, related, but non-competing, companies might share customer information. In reaching target customers marketing needs to support the sales channels by communicating with the audience to create awareness and build up the consideration level within buyers for your product. Marketing strategy is about influencing how customers would prefer to hear about, and buy, your products or services

Sales plans

Together with your sales managers and team(s), prepare the sales forecast. Sales forecasting is a detailed breakdown of the sales to be achieved each month, by customer and by product .Base forecasts on previous sales levels or if a new business base on the business plan. Take into account information about customers’ buying habits, sales cycle and other factors such as pricing and marketing activities. Plot the likelihood of achieving sales, using a percentage figure, and set out timescales when you expect to close them. Agree how much traffic, enquiries and leads are needed to achieve the forecasted sales growth. Divide out how many leads should come from new and existing customers.

Sales planning should identify customers by name where possible but always the number you expect to sell to. Define the number of sales you expect from sales KPI’s such as meetings, calls or other contacts (your sales ‘conversion’ rate). Determine the frequency and levels of sales activity needed to achieve targets. For example, allocate the amount of time to be spent on each account. Remember to include the whole range of activities needed to complete a sale. Decide how many sales people you need to achieve your sales targets, and allocate territories or accounts. Plan sales costs in proportion to the sales or profits you expect to make.

sales-and-business

Prepare the annual sales budget. This is a summary of the yearly sales forecast and acts as a benchmark to compare updated forecasts during the year. Prepare worst case, likely case and best case versions of the budget, and plan what you will do in each case. Revise your sales forecasts monthly, quarterly or annually, using past performance as the guide. Compare sales closed and the sales pipeline with the sales budget. If there is a significant difference between the two figures, find out why. Sales leadership is about adjusting to new challenges, planning new sales initiatives and knowing when to adjust sales expenditure.

Don’t underestimate the sales cycles. The total amount of time taken to complete a sale or acquire a new customer can have a critical impact on a business’s cash flow. If you have a market development strategy, new product or service, it will take longer to make sales. Work with customers’ decision-making habits. Plan out sales drives and product launches in detail. Align sales to the other business activities. An example is not to forecast sales that the software development team cannot deliver. Plan the sales campaigns and social selling to support the marketing strategy (new product launches or new whitepaper). When the sales strategy has been defined, a business may need to adjust the marketing plan as the sales team could have identified a new customer group to target.

Selling resources

There is now a range of sales tools available to a business of any size that will increase efficiency. A CRM or sales forecasting tool is essential to manage information on customers. Consider what resources could make your sales people more productive (example: premium LinkedIn account, Pipedrive, Trello, Zoho, and Salesforce). Also plan to provide appropriate admin support to allow sales people more time to focus on selling. Ensure sales people have access to documents like content marketing pieces, research papers, white papers, industry stats and market research. Use an on-line sales report tool (like Pipedrive) to record relevant information for each customer contact.

Inform and support the sales team. Have regular sessions to make sure sales people understand the business mission, what sets the product or service apart and train them to communicate this to customers. Understand just what value your product or service will bring to the customer’s business; this is the value proposition. Give sales people key information about pricing, profit margins, negotiable areas and product roadmaps. Demand that sales people record their sales activities and produce weekly reports. The sales pipeline by sales person should be scored for each customer deal, reflecting the potential value of sales and the percentage likelihood of conversion. Train the sales people regularly to improve their product and market knowledge as well as selling skills. Monitor and drive progress in supportive, weekly one-to-one meetings to review progress.

Measuring performance

Cost of sale analysis. Review and quantify the time and money spent on different customers. Focus on profitability, margin or deal size before volume of sales. Dig into the win/loss ratio, cost per lead, lead to conversion and cost per customer sale. Analyse which customer segments, sales people and channels are most productive, and the reason why. Monitor the returns on sales costs. Separate out sales force and sales support costs. Analyse conversion rates monthly, using the sales team’s pipeline, forecast and weekly activity reports. Work out how many sales have been made, the cost of customer acquisition and calculate the average value. Measure the data between leads, visits, proposals and deals closed.  This goes for both new and existing customers. Examine each stage in the selling process to find out where customers are falling out of the sales funnel.

Identify problems in the sales process or funnel and find out what has caused them. Do you have low sales into new accounts because of long lead times or the value proposition needs tuning. Identify dead deals or dormant accounts and follow them up. Always remember that selling to an existing customer is far easier and cheaper than winning new ones.

strategy-plan

At the end of the sales and business strategy planning process, a business will have when combined with deep customer insights and needs plus the buying processes will have identified growth channels. Tailor the sales strategy to the market opportunity will ensure sales leadership make winning decisions about where to allocate sales and marketing resources, how to structure the sales force, and how to choose the best sales process that will drive results on a constant basis for the business.

Customer Targeting

Customer targeting or who a business sells to whether it is B2B or B2C, is a key part of the business planning process. Customer profiling and target selection is critical as it defines the marketing strategy, resources, costs and customer target selection lists for the sales team. A businesses services or products may have appeal to a wide range of customers or markets but the reality is you cannot target everyone at once so you need to list your target customers by demographics, segment, industry and size to get the best return possible.

customer-targeting

Every business wants as many people or buyers as possible to know about their business. However when it comes to customer acquisition the more customers you want to reach, the reality is the more time, resources and money it’s going to cost. Defining the customer acquisition strategy and target customer selection may feel like you could be ignoring some groups or segments but it is important to remember that you’re not excluding anyone; for now the business is choosing where to focus, to spend the time and money to win new customers at reasonable cost. Customer targeting focuses a business and ensures all marketing and sales resources are being maximised. Focusing on a market segment or profile of businesses/consumer who could be interested in what company is offering allows you to communicate and engage with that segment more deeply. The cost of customer acquisition alongside the product to market fit is critical for any business success.

Customer Targeting – Action Plan

Consult the business plan.

Review the business plan, the business mission, the product strategy, and then look at the goals the business has set itself, next analyse the products and/or services on offer. Think about how the products or services you sell solve a problem for a potential customer. Also, think about what sets you apart from the competition in your industry—what makes you different? Where are the low hanging fruit? And who might be interested and who may benefit most from having what you are offering. In customer acquisition knowing why customers buy and why they should consider you is vital in identifying your target audience.

Now move on to the information you need to know and why. What do you need to know about your potential customers in order to reach them?

As your ideas become clearer, refine the business plan and go to market strategy to focus on who you want your audience to be, remember product to market fit is a key building block in business success so target selection is ultimately about the customer. Rather than think about who you would like to sell to, think about the market, who do you believe is considering or likely to evaluate the products and services you offer.

customer-acquisition-strategy

Research your customer targets.

Start with free publicly available research. Existing sources like LinkedIn, Google, Industry whitepapers, articles and forums can help most businesses gather together information about your market, the industry, your competition, and the profiles of the potential customers you have already identified. While it takes time and effort, the cool thing is that someone has already done the work and the information you gleam will not cost you anything. Join groups, follow influencers on Twitter, and get access to updates on social media and what the competition is talking about.

Create a typical customer profile.

Once you have narrowed down the customer target list (segment, demographic, vertical, and industry), now you will need to create a typical customer profile. This is not an in-depth profile but a brief outline of what the typical customer may look like including demographics and profiling information:

Demographic information: This might include for B2B targeting – company size, industry, location, financials, and buyer path or decision trees. In B2C this may include – customer age, gender, location, ethnic background, marital status, income, and more.

This information can be essential for developing the actual customer profile list. Demographic information will help you identify the type of person or business who you believe will be most open to buying your products and services.

Locate your audience.

Next step is to get immersed in where your customer target profiles live on the web. Find out what forums, groups and social networks they engage with. Can they be social influenced with content; do they invite connections, what is their culture, habits or interests? The information put together on customer profiles together with knowing where the on-line locations your target audience hangs out or how they use technology will improve your chance to create awareness and shorten the sales cycle.

Refine and improve.

Customer target selection and profiling is a continuous effort as your products and growth stages change. Every business needs to continually conduct research and tap into social networks for conversations to stay current on market and industry trends including your competition.  Also it is important to track how your current and potential customers move through the buyer funnel. A key part is to have the marketing tools and insights to make sure you can track leads, traffic, sales, social interactions, requests for information, and more. All of these customer touch points are important to monitor. This marketing data will help the business to identify trends, patterns, and possible areas of improvement. Refining and improving your cost per lead, cost per sale and lead to revenue metric will ensure you maximise the marketing efforts as your business grows.

Why Customers Buy

Customers buy solutions to problems or solutions for outcomes they need to make their business or lives better. While pricing is important it usually ranks 3 or 4 on buyer’s criteria. Too many businesses rely on the assumption in the era of digital self-education that the most important thing to a customer is price. But buyers and consumers are moving away from the traditional purchasing funnel to a more enlightened decision journey that uses the Internet to change the way they research, value and buy products. If sales and marketing plans have not changed in response to the new buyer-driven decision journey, it better start soon.

So why do customers buy?

Before we answer that, the first thing to understand is that every customer has a “decision journey”. This journey has pre-purchase and post-purchase steps. The pre-purchase journey can be described as Awareness Consider Evaluate Buy.  The post-purchase journey is Reflect Feel Decide.

In this article we will discuss the pre-purchase customer decision journey. Understanding the customer journey and its steps as to why customers buy can speed up the sales cycle improve conversation rates and drive revenue.

decision-journey

Awareness.

They say the goal of marketing is to reach potential customers within a specific market and influence their buying choices by making them aware of their brand or products. Today, buyers are so well informed and knowledgably thanks to the explosion of social media and digital channels, they can create a buyer “consider list” without the company ever having a sales conversation or contact.  Marketing has to align itself to the awareness part of the decision journey. To raise awareness companies need to focus on buyer-driven marketing of which the internet is at the core. Pushing out brochures, advertisements or media buying as part of a company-driven marketing plan is still relevant but buyer-driven marketing is about creating digital properties that pull buyers towards the company, digital properties like whitepapers, product specific informational web sites, content marketing, customisable content, free product interactions, social selling, tools to engage people on social conversations about your industry and products, comment posting and world of mouth interactions, context marketing, etc. So buyer-driven marketing is about raising awareness to buyers who are already most likely engaged on the internet for your products and services.

Consider.

This is the part of the decision journey where consumers and buyers narrow down their buying funnel and start to consider what companies, brands or products they would contemplate purchasing from or not.  Has the buyer-driven marketing plan got the business into the consideration phase of the journey? This can be measured by trigger events like web traffic, sales leads, inbound enquires, white paper downloads and via social media channels like twitter and Facebook. This is where marketing, sales, customer service have the tools to cover all the buyer touch points to make it easier for the buyer to move to the Evaluate step.

Evaluate.

This part of the decision journey is where buyers add and remove companies or brands as they further narrow (and qualify) their buying funnel. General evaluation leads on to active evaluation where information gathering, sales conversations, meetings, presentations, proposals come into the mix. Research shows during the evaluation phase buyers look for ease of use, ease of implementation, product offering and ease of connection to company (multiple touch points). This is also where buyer-driven marketing pays off as buyers now start to “pull” information from the internet, information like product reviews, white papers, and previous buyer ratings while also pulling insights into the company and product via free trials, proof of concept, face-to-face, phone or web interactions, customer references and company policies.

Buy.    

Commitment to buy. Where the buyer selects a brand to do business with and makes the decision to purchase. This is where the company ensures all steps are kept to a minimum, whether its clicks, paperwork, compliance, set-up, downloads, configuration and payment.

Smarketing – integrate all customer-facing activities

The shift in buyer-supplier selling process and the buyer decision journey means that marketers and sales leadership must adopt and view this change as an opportunity to be in the right place at the right time, giving buyers the information and support they need to make the decisions. Sales and marketing have to be one where every touch point from customer facing activities, web sites, PR, leads generation, customer awareness and sales is everyone’s responsibility.

Consider and Evaluate – connect the dots for the buyer

What the buyer is looking for during these steps is Value. If a buyer cannot see the difference between two products, then price wins. If sales and marketing do not address the customer question “How will I benefit from this product or service?” in their buyer-driven and connect the dots for the buyer then the buyer will remove the company from the decision journey or go for lowest price solution.

Remember, people buy because they have needs, a problem needing solving, a goal that needs fulfilling, a situation that needs to be remedied, something that affects their life or  business, and needs solutions.  In the Consider and Evaluate steps buyer preferences usually fit into three main categories, known as PPI:

Productivity – efficiency, ease of use, outputs

Profitability – ROI, making money, increase revenue, improve profit margin

Image – brand, style, reputation, approval, desirability (this is mainly consumers)

Buyer-driven marketing is focused on the buyer priorities with messaging on Productivity, Profitability or Image. Buyer-driven marketing also answers the question “WWFM or what is in it for me?” So why do customers buy?, most likely because a company and its people understand the customer decision journey, created an awareness link to the buyer and then sales, marketing, customer service and product working in unison took the buyer through the Consider and Evaluate steps with a systematic approach based on insights and relevant information

Customer Acquisition Strategy

This is a guide to a customer acquisition strategy. For many start-ups and new companies the customer acquisition strategy and financial cost of customer acquisition is a critical factor in business survival and often underestimated in a growing business. The cost of getting customers can be the difference between success and failure no matter how good a business believes its product to be.  I once read that the goal of any business is to acquire, develop and maintain customers at a profit. The develop and maintain aspects are more clear forward but let’s focus on the cost associated with acquiring new customers regardless of the channel.  

business-success

Every business needs to acquire new customers to make products and businesses work. Whether the product is aimed at enterprises paying big money or getting thousands of visitors to a website, how a business gets and the cost of getting customers are the important part.

The Definition of Customer Acquisition Strategy could be defined as “The process of persuading someone to purchase a company’s goods or services”. The cost associated with the customer acquisition process is a critical measure for a business to evaluate in tandem with how much value having each customer brings to the business.

 

Is The Business Ready for Customer Acquisition?

Paper never refuses ink and this saying has been true in many a business or sales plan when it comes to putting a cost on customer acquisition. The cost is not just the marketing or sales cost but the time and resource cost to getting new customers. Has the business planned for the sales cycle, the demos, the travel, product trials or has a website planned for the cost from free signups to paid, customer or product support prior to a customer making a purchase. In other words, can a business survive while potential customers go through the acquisition cycle? While a quote like “move fast and break things” is exciting in a company start-up situation, it may not be the best advice when it comes to customer acquisition. The decision to start spending investor or shareholder money taking a product to market and begin acquiring new customers should be given the weight it deserves. Entrepreneurs or a business might have spent months or years developing the product, so the execution of the customer acquisition strategy has to be thought out very carefully.

Even before you spend a cent on customer acquisition ask the questions “is the product ready for some/many customers”? Are there still bugs that will make the customer interaction with the product flawed? While the saying “done is better than perfect” to avoid feature creep is practical; it would be a mistake to launch a broken product and fall at the first hurdle.

To take a step back into the business plan around customer acquisition strategy, can a business tick the box on questions like; how many sales calls per day do you expect the salesperson to make, do they have a target list of suspects and prospects, how much activity on the website can the servers handle? Do you have the customer support with the knowledge required to respond to the questions from new customers? Does the product value proposition the salesperson has to sell make sense to people outside the company? In other words, have you done customer validation? These are the type of questions that you need to answer before committing money to a launch.

customer-acquisition-strategy

Being Prepared Always Matters

Any customer acquisition process is not straight forward or predictable but especially so for new companies, but that doesn’t mean a plan is not useful or necessary. The customer acquisition process is far from an exact science. There are many things that can (and do) go wrong, however there are some things that any business can do to mitigate risk and improve the chances of successfully acquiring new customers. Be clear with your team what “Cost to Acquire Customers” (CAC) means, is it paying customers, trial customers, engaged prospects or even website registrations.  In the long run it should only mean the cost to acquire a paying customer.

Estimate the Cost of Customer Acquisition

Money for new product or new business launches is hard won. The budget and time for a start-up may be tight, so the business needs to estimate “worst case scenario” the cost to acquire customers (CAC) before beginning the marketing or sales process. A businesses CAC is loosely defined as the cost of ALL the sales and marketing expenses over a given period of time, divided by the number of customers the business plans to acquire in that time frame. While no business can have a firm sense of the CAC until they begin acquiring customers, having an estimate will help the business leaders prepare to act accordingly.

Logic rules, no matter how excited a business is about getting it out there, do not underestimate the impact of starting the customer acquisitions spend before the product is ready. The greatest risk apart from alienating potential customers by launching a flawed product is the money a business can burn through before it realises it got something in the product wrong.  Every business should ask, what is the baseline product I am willing to “show” potential customers and in what target markets?

Thread carefully in the world of social media and PR, spending time and money on journalists to line up business or product coverage of your launch, only to find out that the product is delayed or has issues, can put the business credibility in jeopardy . Journalists lose interest pretty quickly and are never your friends.

Do Realistic CAC calculations

While a business waits for SEO efforts to kick in, a business may utilise Google Ad Words to drive traffic for (a) for lead generation or (b) sales. Take a look at this example. The cost per click works out at 50 cents, the resulting 1000 website visitors converting to a trial rate of 5% (50) at a cost of €500. These 50 trials are then converting to paid customers at the rate of 10% which is 5. So each customer is costing €100 in just lead generation expense excluding sales/product/support costs. For many companies in the B2C space or in the B2B space with software using the web as their main acquisition channel, it can be hard to get the consumer to pay more than €100 for the product or service

Many business underestimate or do not budget for a realistic CAC, if we take the above example the cost of customer acquisition can climb rapidly if leads require a sales person to convert them. This human interaction can be as simple as email follow ups right up to inside sales people doing multiple sales calls and demos. Depending on the trial/registration rate along with sales conversation rates the cost can vary from €400 to over €5,000 per new customer acquired, depending on the level of interaction needed.

Another CAC calculation is to look at the cost of a field sales force. The fully loaded cost of a field sales executive with travel, car, expenses and salary can push the CAC into over €10,000 in enterprise sales.

In trying to address the single most important early-stage question – customer acquisition – it is easy to waste a lot of money in the wrong channels and on the wrong customer acquisition tactics (lots of companies in the graveyard from just this one failure), especially the new companies that went  toe-to-toe with the big guys and can got blown away.

Every business has to execute in a different way

A business will only thrive by marketing and selling smart; acquiring customers in an economic way and in a way that differentiates the business from the crowd. To goal is to build a customer acquisition strategy for paying customers the business does not have to keep paying for every month.

go-to-market-strategy

Create Demand

In larger companies with deeper pockets while the customer acquisition isn’t exactly simple, they do have more resources. The process of customer acquisition is more challenging for newer companies. Established business’s will utilise bigger budgets, have greater brand awareness, and an ever growing community of influencers. Most new businesses will not launch with a partnership with an established brand like Microsoft, Apple or Google where the demand for the product already exists. Instead a new business has to allocate sales resources and money wisely to fight (and a fight it is) to let potential customers or audiences know that you exist, explain to them why they should show interest, and initially even offering to go the extra mile by holding their hand through the sales process.

The focus of everyone in a new business is not only to create the brand but also the demand. Sales and marketing are not two different departments,  the person leading the marketing drive needs control spend on brand marketing and really understand how to execute lead nurturing, content marketing, web demand generation programs and work hard at marketing efforts that require time but not money. Marketing and sales need to work at the hip to generate a steady, growing stream of leads each and every month.”

Acquiring new customers means understanding what makes your customers tick and investing in inbound marketing strategies such as content and quality articles, got onto the forums, become a subject matter expert and invest in search engine optimization (SEO) as a longer term tactic.

The Business Model

Business model viability, in the majority of new companies, will come down to balancing two things:

Cost to Acquire Customers (CAC)

The ability to extract value from customers, or LTV (Lifetime Value of a Customer)

Web based companies have long understood these metrics as they have a much easier easy way to measure them. However there are huge benefits for all businesses to look at these same metrics.

To repeat the message from a few paragraphs back, to calculate the cost to acquire a customer, CAC, a business needs to take the entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that a business has acquired in that period.  (In pure web plays where the headcount does not need to scale as customer acquisition scales, it is also very useful to look customer acquisition costs with/without the headcount costs.)

To compute the Lifetime Value of a Customer(LTV), you would look at the margin that you would expect to make from that customer over the lifetime of your relationship. Margin should take into consideration any support, installation, and servicing costs.

Manage Optimism with Reality

To be in business requires huge optimism, and in a belief in how much customers will want to buy your product. Unfortunately this can lead businesses to believe that customers will be kicking down the doors to purchase the product. This has the effect of grossly underestimating the cost it will take to acquire customers. In too many companies there is little or no focus on how much it will cost to acquire customers. Vague strategies along the lines of web marketing, and/or viral growth with no numbers is not what you call business!

 

To finish, a well thought out CAC plan outlines the need to acquire customers through a series of steps like SEO, SEM, PR, Social Media Marketing, direct sales, channel sales, etc. with the cost of each step worked out. This planning brings honesty to the real cost of customer acquisition.

 

Sales Strategy – Marketing Services – Sales Consultant – Social Selling – Inbound Marketing – Lead Generation

I'm always available to have a chat on your business plans and any challenges in lead generation, social selling, marketing or sales.