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.

Sales Leadership

Sales leadership should not be confused with sales management; sales management implies authority to manage the sales team whereas being a sales leader implies team buy-in and commitment from the sales team towards higher business goals.

sales-leadership

In a rapidly changing sales environment, decisive sales leadership can be the difference between a company that thrives and a company that struggles to acquire enough customers to survive.

Sales leadership could be described as “the ability to get a salesperson to do something the sales leader wants done because the salesperson WANTS to do it.”

Here are a few qualities sales leaders have that separate them from just being sales managers.

  1. Sales leadership decisions are based on data

Selling is a numbers game, being a sales leader is part people artist, part data scientist. A successful sales strategy is measured in results – performance against targets. Were the sales results better than last quarter? How fast is the company’s revenue growing? Sales leaders know there cannot be “sales teams higher order needs” if the core sales results are not being delivered. Sales leaders through to sales managers or front line sales supervisors need to be number driven, using the data as proof of leadership effectiveness. Using data for sales and performance analysis allows sales leaders to make decisions for future sales growth or plans.

  1. Sales leaders have vision

The sales management aspect of running a sales team is mostly tactical, at the coal face level, sales leadership is about understand the business mission, the product strategy, the market dynamics, having a vision to where the sales growth can flow from and then putting in place plans and direction. Sales leadership is about taking the time to think strategically. Sales leaders impart there vision while stamping there mark on the culture of the sales organisation. Sales leaders devise sales plans, define, communicate and redefine the sales processes while uncovering sales effectiveness drivers using KPI’s.

  1. Sales leaders are empowering

Sales leadership is about getting the balance right between “Activity based management” and “Results based management”. Strong sales leaders empower their sales managers and sales reps to succeed using results based management. This means that Sales VPs or senior management sets the results and vision; they then empower the sales management and sales teams to execute the agreed sales tactics. Leaders lead and managers manage, this is why sales management is more focused on day-to-day sales execution and coaching the sales teams to sell more effectively. Sales leadership focuses on the data coupled with business mission to map out plans that gets buy-in and commitment from all the sales to the point where the sales team(s) WANTS to follow the sales leader and believe in the vision and strategic direction that the sales leader has communicated.

The effort and dedication to earn the title “sales leader” is high, and the business acumen along with business skills sales leaders must master require time and learning.

The path to sales leadership is no easy walk, and not every sales manager will join the ranks of company sales leader (usually a director or VP title. Why? Well research suggests that the average lifespan of VP sales is about 24 months. Why the short career? Today’s tough business market means the CEO has to deliver growth and change. If the sales leader does not manage the change, the CEO changes sales management.

So to be successful in sales leadership, a person has to have the vision. They take the time to think and plan ahead while executing against targets today. Sales leaders see the big picture. While sales managers know the “What” sales leaders know the “WHY and the “HOW”, sales leaders see opportunities and how to get them. Sales leaders inspire while keeping the sales team on track and on their toes. Sales leaders are tough, they say, “Let’s get moving or get left behind.”

Key Performance Indicators for Sales Success

Key Performance Indicators for Sales Success.

Sales in a digital driven world brings different challenges for the sales team, Key Performance Indicators (KPI’s) and sales metrics that reflect this shift is critical for sales success.

Measuring sales metrics like revenue per head, order values, margin mix are still valid measures for sales management as selling is a numbers game. However these metrics are only indicators of past performance, it allows sales management to measure the output but they don’t monitor the inputs needed to grow sales. Sales KPI’s are what sales managers or sales leaders need to use as the indicators to future sales success, indicators that show gaps in the sales process, how strong the sales funnel is, how deeply is the sales team connected to the industry and KPI’s that pinpoint coaching areas to lead the sales team in higher levels of performance.

sales-kpi's

“KPI’s – Measurements of sales activities that are vital gears in the success of a sales engine”

What does the term Sales KPI’s mean?

When sales leadership discuss the term KPI it is not always understood by the sales team or sometimes even management itself. To be defined as a Key Performance Indicator within the team it must be:

  • KEY to the future success of the organisation. A KEY is a measure, one of the plates management want to spin. An example could be “how many direct contacts and connections a company has with buyers in a market segment”
  • The KEY is then related back to the sales team PERFORMANCE where it is measured, monitored, quantified and can be understood by all the members of the sales and marketing teams. Linking a KEY to PERFORMANCE could be benchmarking when a sales person connects (phone call, LinkedIn, meeting) and influences (with great content) to an executive level decision maker in a customer segment.
  • Then this KP (Key Performance) will be used as an INDICATOR; where this information will be analysed to model future sales results or sales plans. So in this example, sales management might want to track the amount of time the sales teams spend social selling, the size of their LinkedIn/CRM database, the number of calls and the amount of time they spend influencing executive level decision makers in their accounts, and then set some SMART sales expectations there that can be measured, maybe the prospect to lead ratio, or lead to proposal ratio.

So when sales leadership discuss Key Performance Indicators (KPI’s), the sales team know to focus on indicators as part of their sales role – the team and management will use KPI’s as signposts along the way to focus everyone to spend time on activities that need doing in order for everyone to be successful now and in the future. KPI’s is one of the best ways to keep a sales strategy on track. Planning and laying the foundations are future success leads to great sales outcomes.

Remember that KPI’s and sales metrics are not the same. Sales metrics are outputs and results that are measured “past performance,” and sales managers have a tendency to give these most attention because they tend to be the metrics that go into sales reporting to senior executives.

KPI’s with a focus on the “Indicators” are sales activities and actions that will be tracked or measured for future success (as the sales pipeline is refreshed).

Here is some sample Key Performance Indicators that could be implemented.

Note: Sales KPI’s are about desired business outcomes, so they will be unique and individual to every business. So begin the construction of sales KPI’s with a clear understanding of the sales strategy and business goals. Try and ensure the KPI’s are specific, maybe it is to “Shorten the sales cycle by 40%”,” Generate 50% of sales leads from social selling” or  “Get existing customers usage up by 20%”. If a business links sales KPI’s to sales strategy and is clear about where the business is going, then any business will have a set of sales KPI’s to get the business to where it wants to get to.

Lead Generation Funnel

Lead generation is not the sole responsibility of marketing, think Smarketing; where sales and marketing both generate leads. How fast and at what cost can qualified leads be generated?  So the KEY is “number of sales leads generated this week” “PERFORMANCE” could be something like the lead response time (especially on inbound leads) to talking (yes talking) to the customer.

The “INDICATOR” might be how many leads got into the sales funnel (lead to proposal ratio). So have the lead generation funnel as a sales KPI , the business can determine how many and who generated sales leads, ideal contact times/points, rate of lead to prospect or how many leads does it take to generate one prospect.

Social Media Selling

This KPI will grow in important over time, social selling to influence buyers and as a channel to lead nurture is now paying dividends for forward thinking companies. If a business is in B2B selling then the sales teams needs to be social selling. Research from top performing sales teams using LinkedIn to build connections show a direct correlation between social media selling, leads and revenue as a result of activity in this channel.

KEY = Number of connections in sales funnel on Social Media

PERFORMANCE = number of leads generated or document views on LinkedIn or SlideShare

INDICATOR = Number of buyer discussions or leads generated from social selling channel

Sales Cycle

Sales Cycle is more of a sales process KPI. How many touch points (calls, meetings, presentations) over a given period of time needs to happen to ensure customer moves through the sales funnel. It also includes rate of contact as the focus is on the levels of performance and efficiency not just with the sales person, but with the company including pre-sales and customer service. When a business understand the sales cycle length it can forecast, budget and adjust the lead generation funnel creating efficiency in the sales engine but also controlling cost of sales.

Lead to Win/Lose Ratio

This KPI is critical to understanding how effective a sales person is at moving customers along the sales cycle. It also can throw up questions on sales training, product fit and pricing strategy. The focus here is on the lead drop-out rate, the connection between social selling and the sales cycle process. What is profile of customer guided through the sales funnel and what is the profile of customers who abandon the sales process at the proposal stage (think buget, needs, authority).

Sales KPI’s are powerful because they help sales leaders or senior sales management make better decisions, which leads to better sales execution and ensures a consistent approach across the sales focus. But mostly sales KPI’s ensures that the sales teams are connected to the overall sales or business strategy because everyone is focused on the KEYS that will make the business stronger.

Sales Strategy Plan

A sales strategy is the process of matching the business purpose or mission with a sales plan, then putting in place goals, metrics and sales tactics. The sales strategy will also map out courses of action and allocating resources to achieve the selected goals and tactics.

sales-strategy

A sales strategy is really about answering the one critical question “What is the best most viable method for the business reach paying customers for the product or service? Is it sell to or sell through, direct or indirect?

Before a sales strategy addresses how the sales team will sell or, it must first address how customers are buying. Today customers are seizing the balance of power in the buyer-supplier relationship, more and more aspects of the sales process is being played out online, so companies need to structure the sales plans and resources for this new reality.

  • “57% of the purchase decision is complete before a customer even calls a supplier.” (CEB)
  • “67% of the buyer’s journey is now done digitally.” (SiriusDecisions)

Today’s selling reality.

Potential customers or prospects will have researched a supplier based on digital reach and industry influence before a sales rep ever gets to talk to them

Sales and marketing are now one team, an integrated “Smarketing” team that functions to target and acquire customers.

Understanding customers buying behaviour define the product offerings.

To sell more and win market share a business needs to offer more seamless customer service touch points through lower cost channels

Vanilla flavoured selling will disappear, sales teams need to be specialised, social enabled and multi-channel savvy.

Sales reps have to work at adding value in the sales process rather than just quote features and benefits.

Sales complexity and the sales process needs to be minimised to ensure selling costs are controlled in a tighter margin environment.

The key Sales Strategy Questions.

Asking and answering a series of sales strategy questions will help a business identify and take advantage of the best opportunities to sell better and more often. Also Sales leaders who acknowledge the new selling reality need to know how to answer questions like:

  • Does the business have a market development lead strategy (selling more of same product to same/new customers) or a product development strategy (selling new products to same/new customers)?
  • Who is the business selling to? Does it know which market segments have the best growth rates?
  • What is the most effective means of reaching target customers and what is the cost in taking this route?
  • How does marketing and sales share the workload and collaborate?
  • How does the business equip the sellers (direct, indirect, partners) with the right content, expertise and skills to navigate the customers’ buying journey and then differentiate the business value proposition?
  • Does the business collect and analyse data to forecast which products customers are likely to buy or trends developing?
  • What is the most effective sales and distribution model?

“To compete in today’s customer educated world, companies got to have something different. The product must higher quality, easier to use, more convenient to buy, or a better fit than the competition.”

Sales Strategy Selection.

The sales strategy selection should cover what is the customer sweet spot, what are you offering them, sales deployment for customer coverage based on customer sweet spot, sales and marketing activities, what sales and marketing enables/tools will the business use, how you will manage and track performance against the goals.

  1. The target market. This is the customer selection, customer sweet spots where the sales and marketing focus will be.

Give it some detail. Once the target market has been defined, give it some detail. How big is it, profile of customers, buying preferences then create a hit list. The hit list should be number and data driven, do you have 100 or 1000 or 10,000 prospects on the list.

  1. Reaching the target market. What is the primary reach method or put another way “what is your customer acquisition plan”, is it on-line, social media, cold calling, partners, channel or networking?

Regardless of the method to reach paying customers, reaching the target audience takes “Smarketing”, sales and marketing working together on tactics like content marketing, social selling, industry influence, thought leadership, blogs, and whitepapers, audience reach on Twitter, Facebook, and LinkedIn etc.  Effective sales strategy using Smarketing means a business drives marketing qualified leads (MQL) and sales-qualified leads (SQL) into one sales funnel, then measures, monitors and ensures follow up on the leads generated for the business.

A business needs to map out the sales cycle and sales process. This is all about getting the sales team selling. The “Smarketing” effort should have a target of generating leads via inbound marketing, landing pages, request for information, social selling on LinkedIn and other social media sites, cold calling or field visits.

  1. Customer Nurturing. The sales process should be void of any unnecessary complexity or obstacles in customer interaction. The sales process has to include social selling, where the sales team gets engaged with social selling to the prospects. This stage is where prospective buyers are sourcing, digesting and reviewing information and content. A recent report by Act-On showed that 85% of Business-to-Business buyers said it takes three or more pieces of relevant content to help make a decision on progressing with a supplier. So, a business can lead nurture by influencing the buyer to take action by feeding them with relevant content on their terms or personalised preference.

Make sure the sales teams are delivering on what the marketing message promoted. Vanilla feature and benefit selling is gone, train the sales team to be industry experts, build the customer relationship. Don’t expect them to stay with you or use you for other needs if you are not taking the time to build a relationship with them. The sales process does not end with the sale.

  1. Collect and Analyse Data. This is one of the most critical aspects of a successful sales strategy. As a business moves forward with the sales plan it must collect, track and analyse how well the sales tactics, product offerings or pricing is working. Every sales rep to sales leader should be asking these questions:
  • How did it go?
  • What worked?
  • What didn’t work?
  • Did we hit the numbers?

Collecting the data gives the insights as to what works and what does not so a business can tweak the sales process.

So to recap, the Sales Strategy should cover:

Target Customer Profile – Customer Segmentation – Sales /Distribution Model – Sales Process Definition (i.e. Sales Cycle) – Sales Funnel Calculation – Pricing Strategy – Upselling and Cross selling Strategy

The actual Sales Plan Components should include:

Sales Materials – Content Materials – Sales Team – Smarketing, Sales Pipeline – Customer Nurturing and Channelling – Sales Cycle – Closing Techniques – Sales Forecast – Timeline – Budget

The challenge for sales leaders today is to better execute on their sales strategy. Buyers and business even consumers are going through changes in what they buy, how they buy, and what they are willing to pay for it. As buyers change how they buy, vendors need to change how they sell. The way a business sold its products or services is not going to cut it in the future. Sales strategies need to be nimble, social driven and customer lead. Now is the time to revisit and revise the sales strategy.

A Strategy for Business Success

The strategy for business success are built around three pillars: The Product, The Market and The Team. Each pillar or a combination will most likely determine the success or failure of a business. The core pillar or strategy to focus on is “the product to market fit”. In business schools they say that a business fails for two reasons, lack of funding or lack of strategy execution. Strategy execution should centre on getting the product and market fit right. If the product to market strategy execution by the leadership team is not right, the cost to fund the business for customer acquisition, sales, marketing and product development increase to the point where value cannot be captured.

What causes business success?

In business which strategy pillars contributes the most to success of the enterprise, the team, the product or the market? Or put another way “what is the biggest cause of success”? Also which is the weakest link: a bad team, a weak product, or a bad market?

Let us briefly dig a little deeper into these three pillars. Investors and venture capitalists often say they don’t invest in businesses they invest in people, so the team can be defined as the potential effectiveness of the CEO, co-founders and senior staff relative to the market opportunity. Can the team execute against the market opportunity they have identified, will their effectiveness overcome any lack of experience, and has the team the ability to deal with the “never seen it before” obstacles.

The product can be defined as to what problem is it solving and how impressive is the product to any customer or user who actually uses it: How easy is the product to install/set up and use? How feature rich is it? How fast can the benefits be seen? How transformational is it? How well-crafted is it? How has it been tested and what were the results?

The market is the size, number, predictions and growth rate, of those addressable customers or users for the product.

One other pillar that has to be planned for is “the Cost of Customer Acquisition”; meaning that the cost of acquiring a customer is lower than the revenue or profit that customer will contribute. The rate of customer acquisition has to do with execution and the ability of the team to move enough prospects through the sales funnel. Remember also that product quality will not create market size; Steve Jobs learned that lesson with his NeXT business. What a business needs is a desirable product, a big enough market and an economical way to target it.

business-strategy

So which pillar is the Number.1 building block for business success?

If anyone conducted a survey amongst business people on the question of which is the most important factor in business success, they probably would get three different answers.  Some will say team, some on the product, while others will choose the size of the market.

As written about earlier in this article, if you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is an obvious answer because most of their knowledge and reference points in the beginning is the team as the product may not be built or ready to market plus the market will not have been fully evaluated yet.

Marketing and techies will say the product is the most important factor. The business is product driven, creates great products, then markets buy and use the products. The most valuable companies today are brands such as Apple and Google because they build the best products and without the product there is no company. Right? Try building a great team and having no product, or a great big market and having no product.

This leaves “The market”, where researchers, students of business success and business leaders will tell us that the market is the most important factor in a business success or failure. The argument is that in a big market (fragmented market or badly served by existing solutions), a market with lots of real identifiable customers, then the market needs will pull products out of the business. The market is ripe for change, has an appetite that needs feeding and the market will consume, viable products that will feed it. Maybe the product doesn’t need to be the greatest; it just needs to work. And, the market doesn’t care how good a team the business has, as long as the team can produce those viable products.

Has history shown us that the No.1 business killer is lack of market?

To expand on this a little further, maybe the business killer is not just lack of market, but more importantly a lack of product to market fit. Could the building blocks for a successful business be about being in a sizeable market with a product that can satisfy enough of that market to make profits?  Is being in business about “making things that people want and will pay for”

Take the example of search engines, smartphones, online marketplaces even cars, when there is a growing, sizeable market with an appetite for change. Is this the story of telephone directories morphing to the web as search engines, the evolution of the telephone into people’s pockets, the buying and selling of goods being streamlined online or the transportation of people becoming about journeys.

The flip-side is in a market with little appetite for change, a business can have the best product in the world and super leadership team, and it may not matter, the business is going to fail. A business can spend a heap of money digging for years trying to find customers willing to pay for a product, little reward for a lot of effort and the team eventually will disintegrate, and the business folds.

Has history shown us that the No.1 business success factor is market?

When a great business team meets a stagnant market, market wins. When an average business team meets a great market, market wins. But when a great business team meets a great market, then something really special happens. Now this is not to say a business can’t screw up a great market, it has been done many times, but assuming the team is effective and the product is accepted in the market, a great market will tend to return success for the business and a poor market will tend to return failure to the business. So does Market matter most?

A few things worth remembering

Great products are really, really hard to build. So surround yourself with a great team, as a great team will always beat a mediocre team, given the same market space and product appeal.”

Great products can sometimes create new markets. Product that are so transformative to business or consumers it creates a whole new big market and the business becomes a gorilla. Think Microsoft.

The team needs to know how and on what battle ground it will take on and beat the competition to gain market share.

As a business leader or start-up, what should you do next? Focus on the thing that matters; get the product to market fit right. Product to market fit means getting into a good sizeable market with a product that can satisfy that market and capture value for your business. Do whatever is required to get to product to market fit. Seek out people who can help build your vision, change the product, change the sales model, move to a different market, tell customers you need some customer validation for the product, whatever is required.

Lastly, build a team that can make the product to market fit happen.  A team that can go out and get customers buying the product. Next get product usage growing across a wide range of paying customers.  Customer acquisition and market acceptance of the product means the team has got the product to market fit right which means the business can grow by hiring marketing,product, sales and customer support staff. The strategy for business success will always be the product,the market and the team.  So the business plan and go to market strategy needs to address all three.

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 – Inbound Sales – Digital Sales Transformation – Social Selling – Sales Training

Sales training and digital sales transformation including social selling strategy training in Ireland.