Page 101 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes the variety of circumstances individuals and households face in purchasing new products.
To succeed, it is necessary to promote a number of different products that meet the
customer’s specific needs.
4. Failing to Offer Price Appeals: While marketing arenas are intensely competitive with
consumers increasingly demanding discounts, coupons and other price benefits when
making decisions; many retailers’ customer acquisition programs ignore the importance
of price appeals.

5. Failing to Offer Premiums: Premiums operate at two levels within customer acquisition
programs. The first involves the prospective customer, and the second involves the current
customer. Many customer acquisition programs do not offer an attractive, immediate
incentive to which prospective customers may respond, despite substantial evidence that
such premiums motivate prospective customers to take immediate action. Substantial
evidence also exists that premiums are cost-effective in customer acquisition programs.
Customer Acquisition Cost

Customer acquisition cost is the cost associated with convincing a consumer to buy your product
or service, including research, marketing, and advertising costs. An important business metric,
customer acquisition cost should be considered along with other data, especially the value of the
customer to the company and the resulting Return on Investment (ROI) of acquisition. The
calculation of customer valuation helps a company decide how much of its resources can be
profitably spent on a particular customer.
At the height of the dot.com bubble, companies frequently ignored such calculations in their
pursuit of growth. For example, according to Optimize Magazine, at one point CDnow Online
was spending about US $40 to acquire each customer, although the average lifetime value of a
customer to them was only about US $25. The Optimize article suggests that it is not good
business sense to spend more acquiring a customer than the amount that customer will net the
company in return.
Customer acquisition cost is calculated by dividing total acquisition expenses by total new
customers. However, there are different opinions as to what constitutes an acquisition expense.
For example, rebates and special discounts do not represent an actual cash outlay, yet they have
an impact on cash (and, presumably, on the customer).
Acquisition costs vary across industries and mediums. When acquisition data is available, try to
determine if you are comparing apples to apples, so to speak. This is not always easy, as customer
acquisition data can be scarce, and the methodology is often sketchy.

4.2.3 Customer Acquisition Management

Customer acquisition management is a term used to describe the methodologies and systems to
manage customer prospects and inquiries, generally generated by a variety of marketing
techniques. It can be considered the connectivity between advertising and customer relationship
management. This critical connectivity facilitates the acquisition of targeted customers, in the
most effective fashion.
Customer acquisition management has many similarities to lead management. Sometimes
missing from lead management definitions, but always included in customer acquisition
management, is a closed loop reporting system. Such a reporting system typically allows the
organization to quantify the effectiveness of results of various promotional activities. This
allows organizations to realize continuous improvements in both promotional activities and
customer acquisition systems.

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