New Customer Acquisition - Campaign Marketing Myopia

By: Michael Falkson

Download this customer acquisition white paper in pdf form.

This paper will focus on sales lead generation for companies that seek to acquire new customers one on one- where transactions are infrequent but substantial, or small but numerous.

The marketing concept teaches us that we're all in the business of acquiring new customers and retaining existing ones, and that success in business is largely the measure of our ability to carry out these functions effectively. We are concerned with companies that recognize that the lifetime purchasing value of their customers is the most important asset in their business. The marketing mission of every such company is the acquisition and retention of new customers. Are there any companies that have enough customers - and where the door has been closed to new ones? Do you know of any?

Knowing You Cost-Per

Ad spend covers a wide range of media: TV, radio, newspaper, magazines, outdoor, direct mail, trade shows, telemarketing, etc. All, with the exception of outdoor advertising, are capable of cost-per-lead, or cost-per-customer, or cost-per-customer-per-source accountability.Managerial logic requires that all marketing expenditure that can be analyzed in relation to new customer acquisition (NCA) should be put under scrutiny, routinely. And that management should examine and probe the cost-per-source, cost-per-sales lead, cost-per-new customer schedules (and others) which will be derived from this thinking - to learn and heed the lessons that surface.

Budgeting for New Customer Acquisition

It is amazing how few companies set aside a significant portion of revenue for the express purpose of NCA even though this is one of the primary objectives of marketing. It is possible that a significant proportion of your marketing expenditure does support NCA.

Consequence of Budget Cuts

Consider the situation where a recession hits and the company is required to cut the budget. Often one of the first items the financial committee cuts is marketing and sales support. The general reason is management feels the company will still be in good shape after a year (sometimes longer) of low marketing spend.However, if an amount of the marketing budget were to be set aside for the specific purpose of NCA, the consequence of budget cutting would surely demand more careful thought. For if reduced budgets translate directly to reducing the number of new customers - as would inevitably be the case - there would be a hasty retreat from implementing this drastic step.I believe that if the budget cutters had evidence of the fact that expenditure was securing new customers at a profitable cost per new customer, many a finance committee would agree that the budget cut should be restored, if not reinforced.

Reconsidering Cost-Cutting NCA Budgets

A decision that undercuts the company's ability to win new customers whose initial purchases may immediately repay the cost per new customer does not make good sense - especially to a company feeling the pinch of a recession or difficult business environment.Of course, not every new customer immediately repays the cost of acquisition. Some will require a longer period. The equation may become murky when the money to finance NCA comes from more than one source: sales, advertising, PR, and sundry marketing expenditure depending on company rules and traditions. But there's a great deal to be said for grouping all NCA expenditures into one budget so that cause and effect can be accurately revealed and studied.

Case in Point

Here is an example of cause and effect for a high technology company. Statistics have been kept for sales to new customers generated from opportunities produced by outbound, inbound and electronic marketing for the last six years.

  • At the end of 12 months after the opportunity was identified, client had logged revenue of $13,954,000.
  • Over the following five years these same leads generated a six-year total of $51,941,000.
  • In other words, for each dollar invested: $13 of revenue resulted in the first year, and $51 of revenue for every dollar invested over a sixyear period.

These are remarkable returns for a small investment, yet they are far from unique.

Care and Development of Sales Opportunities

High-quality sales opportunities generated by outbound telemarketing or from direct advertising, PR and marketing promotions must be qualified by engaging the potential customer in a dialogue.The development and nurturing of these opportunities and inquiries are of the utmost importance to successful NCA. It is one thing to generate inquiries and opportunities, it's quite another to control and follow them through to successful acquisition and thereon to lifetime retention.

Inquiry Management and Control

Sales opportunities are precious to the company's successful acquisition of new customers. Yet there are too many instances where inquiries are not given the high-caliber care and management they deserve. The net effect of managerial negligence is that business worth billions is lost to competitors who better recognize the importance of disciplined inquiry management and control.Opportunities must be properly captured to a CRM system - to enable ROI analysis on lead generation. Opportunities must be timely distributed to a salesforce (or a channel). These salespeople and or channel partners must understand that they will be held accountable for every qualified opportunity delegated to them. All opportunities, without exception, must be controlled through to successful NCA - and beyond.

Customer Relationship Management

Only an effective CRM system can provide the controls needed to guide and track the progress of every sales lead, ensuring that top management has the security of knowing that every lead, from whatever source, is given the respect and follow-through attention it deserves.Opportunity tracking should also incorporate the fate of every inquiry that comes in by phone, email or snail mail; or arrives in person. These should enter the sales pipeline and be tracked through to success or failure. The former should be tracked indefinitely. Compliance measures are needed to ensure that opportunities move through the selling cycle in an appropriate manner. Sales personnel or channel partners who do not comply should be held accountable.

Campaign Marketing Myopia

Why are so many companies engaged in NCA tied to the short-sighted ideology of campaigns or projects? What happens when the campaign ends? Does the company effectively close the door on acquiring and selling to new customers? Surely not.

Time to Think of New Customer Acquisition as an Annual Activity

Most budgeting for marketing spend is done on a campaign basis. Some campaigns run for years, while others are short-lived. In practice the same campaign continues until replaced by a new theme.Direct response advertising (for convenience, we will include B2B telemarketing) is generally project-based. Herein lies the danger - as well as the promise. For if it is accepted that companies have a continual need for new customers, it makes the best sense to carry out NCA activity all year round, every year. I believe companies should discard the current campaign or project orientation in favor of annual budgeting for NCA. NCA expenditure should only be cancelled when the company no longer needs new customers.

 

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