Growth Strategy That Lowers The Cost Of Customer Acquisition
The highest compliment you can receive is your customer referring you to their peers.
You do that by securing them as a customer, providing real value, and helping them drive their business - and their people - forward.
Years back, I worked with a group to map out their typical customer journey. It is common to see companies map out their selling process and the stages in the buyer's journey, and then be obsessive about landing as many new customers as possible. One of the first things I did was interview customers who had provided referrals. It was in one of the first calls where the customer mentioned that her Customer Success Rep understood her needs in great detail and was a joy to work with. When I went to share this info and relay the kudos is when it hit me - I saw it right there on her desk.
She understood her customer in great detail because she took the journey map, added 22 detailed steps of what success looks like for her client, and how to ask the right questions to gain those insights at each stage. Bingo.
What she had done was shift the focus from what she and the business needed to move forward to the next sale, but to what it took to exceed the customers' desired outcomes at each step of the customer journey.
From their first interaction with your brand to how easy it is to pay your invoice, every single action enables your customers to become passionate advocates and provide referrals. These referrals reduce the customer acquisition cost (CAC). As a leader, it's easy to see that your strategy fails when CAC exceeds your customers' lifetime value (LTV).
CAC = ( Cost of Sales + Cost of Marketing )
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New Customers Acquired
Why share such a simple graph?
Because many times it's not top of mind of your sales and marketing teams. Your executive leadership may know it, but your managers need to live it.
According to the Journal of Marketing, a referred customer has a 16% higher customer lifetime value (LTV) than a non-referred one, and according to the Wharton School of Business, the lifetime value of a referred customer is 25% higher than that of other customers. Because of this, companies that invest more in landing new customers rather than focusing on boosting their current customers' experience are missing out on future growth.
“Gaining any customer any way you can, regardless of the cost, time, and energy it consumes is not your path to scalable growth.”
You can take steps to grow by gaining insights at each stage of the customer lifecycle, such as knowing why a project kickoff/product onboarding went smoothly, how they are interacting with your products, or why they haven't purchased from you again. Leaders who understand this principle also recognize that data is the basis of discovering the right go-to-market strategy.
Five ways to enable a customer-driven growth strategy:
1. Research
Dive into the details to determine the standard firmographic info of your happiest customers and insights on how you've exceeded their desired outcomes. Understand who your ideal customer profiles (ICPs) are. Rally your sales, success, product, marketing, and delivery teams to those good-fit customers. If you do that, not only will they love your brand, but they will be your advocates.
2. Be transparent and proactive.
Let your potential customers know you will not only ask for their feedback on how your team is doing, but you'll glean insights across all stops in the customer journey. You'll ask questions on their favorite companies to work with, why you prefer working with them, and what makes their account executives, customer success managers, and project management teams great to work alongside.
3. Leverage your subject matter experts.
While some on your team possess valuable industry knowledge, many are still learning or don't have the sales enablement for success. Leverage the professionals across your company that brings that subject matter expertise to your calls and meetings, regardless of the department they work in.
4. Over-communicate internally and externally.
Proactively reach out to your project sponsors, users, and key personas. Propose what is going right (and wrong), and leverage quarterly value reviews with your decision-makers as a tool to get candid feedback. Internally, share how your executive team supports customer-focused principles. If you're asking your employees to carry out a customer-focused strategy, you need to be doing the same with your business planning.
5. The truth is in the numbers.
If you cannot show your customers how they see real value in your product or service, you attract the wrong customers or don't understand your market fit. When you can track this, your sales close rates, the number of happy customers, and revenue increases. Go well beyond tracking Customer Satisfaction Rates, Usage Stats, and Net Promoter Scores. Go deeper into metrics that may not be top of mind, such as Days Sales Outstanding (DSO), which is the average number of days that receivables remain unpaid. Of course, DSO shows how well your accounts receivables team is collecting payments. A lengthy DSO could also mean your customer is dissatisfied with your company, or that your marketing team is attracting bad-fit customers that your sales team is finding a way to close. It's common to pay your best partners and vendors first, which is being seen more during economic uncertainty.
An effective customer-focused go-to-market strategy begins with understanding each touchpoint in your customer journey and then being an advocate for every experience provided during those touchpoints. With the real challenges we face today, your teams and your people need you to embrace your customer-focused strategy to find more leads and lower your cost of customer acquisition.
About The Author
Ross Reed is a company growth expert and entrepreneur who has developed and led high-performing companies, from bootstrapped start-ups to global technology corporations, including INC 5000 fastest-growing companies.