Recently we produced a Whitepaper called “The Rising Cost of Doing Business” which covered increasing ‘input costs’ negatively impacting the profit organisations can achieve. Since this article was released, the situation has not got any better and continued confusion around things like Brexit will only make it worse.
Expanding on this theme, we take a look at the highly topical subject of increasing costs of Customer Acquisition. No matter if you are a B2B or B2C company, there are numerous factors causing this, ranging from the rising cost of labour to deliver, manage your sales and marketing functions to the raw cost of customer data becoming more expensive due to the restrictions (real or perceived) caused by the introduction of GDPR.
There are, of course, many levers you can pull to try and combat these escalations in price. First, be more effective in your sales efforts; second, move or outsource the work to a lower cost market, and/or make better use of the data you already have. These are all very valid strategies and ones that should never be ignored. However, there is another method that is often overlooked despite it being one of the most effective – how about improving your customer retention rates so that you can maximise the opportunities from secured customers?
There are a lot of metrics companies focus on, but churn or retention rates do not always get the attention they deserve, and this is sometimes because businesses do not know what to do to address a poor result, or even know what one looks like. In some instances, management may think that a high churn rate is ‘normal’ for their industry.
At Expense Reduction Analysts, we can work with you to address all the levers, of course – reducing input costs is our ‘bread and butter’. But if you want to look at why you are losing customers quicker than you can acquire them, that may take a different type of assessment altogether. At a very high level, you need to start by mapping your current customer journey and aligning that to what you want the experience to be.
Once you have identified where the gaps are between the current state and your desired state then you need to identify how you can best deliver the new experience, how you measure satisfaction with the new journey and ultimately, how it is impacting your customer retention levels.
Each stage of this can be highly complex but the process is clearly worth it when you see the impact on the bottom line when customers are retained for longer, because this offsets the need to increase new customer acquisition and its associated costs. Of course, if you are still willing to invest heavily in acquiring new customers whilst retaining more of your existing ones, that would put you in an even stronger position for the uncertain future.
Article by: David Rickard