The customer acquisition cost is the sum of all the costs associated with attracting new sales or clients in any business activity. It is expressed as a percentage of the sales price or an average order value per month. The most critical customers and the most lucrative buyers are profitable (so lifetime customer acquisition value is greater than the customer acquisition cost). The accounting records and financial flow can reveal a significant loss because the customer acquisition cost is usually incurred upfront. In contrast, the customer acquisition cost is realized over the client’s life. So, if you want to improve your P&L this year, here are three top P&L improvements you can focus on.
You need to gather more customer data.
The first step is simple enough. A common problem for businesses is not having enough good customer data to base a good sales strategy. You must first identify your customer data and then set up a process that will increase customer data level. For example, you can open a customer data warehouse to allow your sales team to look at customer data from anywhere.
The second thing to look at is your sales target and its average sales cycle length.
Your sales target should be the customer acquisition or sale outcome you are trying to achieve. The longer your target is, the higher the average sales cycle length and the lower your revenue and profit margin. You want to make sure that whatever you do, you stay below your sales target and increase your customer acquisition.
The third item on the list is customer retention.
Your news must be trained on sales enablement. They must understand how to close a sale, and they must know how to make it happen. If your reps don’t know how to make a sale and don’t instruct them, they will not learn, and they won’t get better. Rep performance measures should focus on customer retention and customer satisfaction.
Finally, there is a secure lead generation.
A third-party vendor like Autoresponders has long been used for secure lead generation. This means that your employees know who you will send to a prospect’s phone. However, the old method of printing out phone cards, mailing letters, and using other direct marketing approaches to generate leads has been replaced with e-mail, Internet telephony, and video conferencing. The idea is that you have your employees secure information about the lead via a secure data room before you send him or her on to the next step.
Again, there are many ways to evaluate sales enablement.
But here are some ways to look at things.
First, the measure of how well a company is doing in retaining its customers relates to customer retention and the turnover of those customers. That is, a good measure of customer acquisition cost should equal the ratio of the total number of reps who resign or are terminated per year to the number of new buys or contracts. If this is not the case, then the investment in talent and capital needs to be adjusted upward.
Consider both the ratio of reps who resign or are terminated per year and the turnover rate.
If the ratio is high, that means that companies are wasting a lot of talent and that their leaders aren’t providing the support they need to retain talent. If the turnover rate is low, it could mean that people feel more attachment to the company and that they value being a part of something bigger than a contract or sale. And if the talent transfer costs per person are high, it could mean that you are paying too much for each employee. The goal is to eliminate both the high cost of talent and the high turnover cost, which should lead to a higher share price for the stock.