This article was authored by Jeanne Heydecker and originally published on the Woomentum network.
What is your customer acquisition strategy, cost, conversion rate, channels, and costs per channel? Your customer acquisition cost can vary widely depending on your business model. You may have a variety of business models in place to diversify your revenue generation (a wise decision). Your go-to-market plan should clearly show your initial costs, but also consider the lifetime value of a client. Do you have mechanisms in place to extend the lifespan of a client beyond their initial purchase?
For example, that would be extremely hard if you were selling residential heating systems which are typically replaced once every 20 years. But you could sell annual preventive maintenance contracts and pre-sale equipment certifications before selling a home. Let’s say you sell HR software. Instead of one standalone software that does everything, porting it to a website as a Software as a Service (SaaS) bundle of individual components enables you to sell individual components at lower price points and enables customers to add components as they grow or need additional services. Instead of selling the components once, enable then to rent the software for a small monthly fee based on a fixed set of features (basic, extended and premium) or number of users. This facilitates two things – recurring revenue with customers extending their lifetime value, and increased difficulty and cost to convert to a competitor. Once a customer invests their own time uploading all the information about their company and personnel, the likelihood of them moving elsewhere is significantly diminished. The only reasons they would move would be a significant increase in their costs using your software, poor quality software, or if they feel your customer service experience is poor.
Upselling existing clients is always easier than finding new clients. They know you, they understand your processes and may very well be receptive to new products or services if they have been happy with your company so far. Identifying new clients can be very costly, but you may need to focus on that. I once had to change the compensation structure for a company that relied heavily on two or three big clients that paid the bills. The risk of losing even one of them would mean cutting back on the workforce, cutting benefits and delaying any additional development we had planned. I introduced the change to the sales people on a Friday afternoon knowing this was not going to be pretty. I was downsizing their commissions on sales to existing clients, and doubling the commission on the first sale to a new client. One person quit immediately. Another literally threw the sales book at me and stormed out. But they were both back to work on Monday. Ultimately, they understood the situation and we managed to significantly increase sales over the next quarter.
Once a quarter, or even annually, put your best people in a room and brainstorm on ways to extend the lifespan of a client beyond their initial purchase. Their ideas may drive your company into new areas or even pivot your organization into exponential growth with recurring and diversified revenue.