The costs might include prospecting costs, advertising production costs, media costs, commissions to salespeople, collateral materials, sales promotion costs, credit referencing, database costs, and the salaries and wages of staff charged with customer acquisition. Many sales managers incentivize their salespeople to find new customers. These incentives, whether cash or merchandise or some other reward, are also a cost of acquisition.
OPERATIONAL CRM TOOLS THAT HELP CUSTOMER ACQUISITION
A number of CRM tools help in the customer acquisition process, including lead manage- ment, campaign management and event- based marketing applications. We cover these in more detail in Chapters 8 and 9, but introduce them here.
Lead management
CRM software helps companies to manage the selling process. An important part of that pro- cess is lead management. There are hundreds of different lead management software vendors.
Many of these enable the recommended lead management practices of published sales meth- odologies to be implemented, among them the CustomerCentric Selling, Miller Heiman, and Solution Selling methodologies.
The lead management process includes a number of sub- processes, including lead gen- eration, lead qualification, lead allocation, lead nurturing and lead tracking.
Businesses need to develop and apply rules around these processes. For example: who is responsible for creating the database record of inbound customer enquiries? How will leads be qualified? What principles will govern the allocation of leads to salespeople for follow- up?
An example of a simple business rule associated with lead management is: “All enquiries will be maintained on the database for a minimum of three years.” However, business rules can be considerably more complex. Consider the lead- allocation rule. Sales teams may be organized around geography (North America, Europe, Asia- Pacific), by industry vertical
CUsToMER aCQUIsITIon
(automobile, telecommunications), or in some kind of matrix structure. Sales people may vary in their relationship management skills, seniority, experience, language expertise and product knowledge. All of this can mean that businesses develop complex rules around lead allocation. CRM software contains workflow that enables business rules to be defined and actioned.
We have discussed lead generation earlier in this chapter. Lead qualification processes prioritize leads so that a company can invest its selling and marketing resources where they generate the best returns. High- value leads, also called strategically significant leads, are those that will produce high margins, buy in quantity, have a higher likelihood for repeat sales, gen- erate high levels of positive word- of- mouth due customer satisfaction, and are relatively easy to close because they are not committed to current suppliers.
Other important questions for lead qualification are: Does our product or service solve a customer problem? What is the timeframe for the prospect’s purchase decision? Does the prospect have authority to buy? Authority to buy may be vested in a named individual, a decision- making unit composed of a group of employees, a group composed of internal employees and external advisor(s), or in some rare cases, an external individual or group. Can the prospect pay? Ability to pay covers both cash and credit. The ability to pay of prospective customers can be assessed by subscribing to credit rating services such as Dun & Bradstreet, and Standard & Poor’s. Being a well- known name is no guarantee that a prospect is credit- worthy, as suppliers to Lehman Brothers, the global financial services firm, found out when the company declared bankruptcy in 2008, precipitating the global financial crisis.
CRM software applications allow prospects to be scored against these and other rel- evant criteria. Higher ranked prospects are then allocated to salespeople. Lead allocation rules ensure that leads are routed to the right salesperson, as described above. Lead nur- turing processes ensure that leads receive levels of service and support that help build and maintain trust and confidence prior to becoming buyers. Lead tracking processes trace the conversion of prospects into customers. Lead management software generally allows sales- people to customize their interactions by applying workflow rules that vary according to prospect attributes such as company size and level of qualification. Sales reps may want to reject leads, further qualify them, re- define (convert) them as opportunities, or take other actions as required.
Successful lead management programs are supported by standard reporting and ana- lytics. Sales managers want to know which lead generation programs generate high conver- sion rates and/ or high revenues, which leads are costly to convert, and which territories and account teams have the greatest success at lead generation and conversion.
Campaign management
Campaign management software is widely deployed in B2C environments and increasingly in B2B environments for new customer acquisition. Campaign managers design, execute and measure marketing campaigns with the support of CRM technologies. Campaigns can be single medium, multi- media, or omni- media using direct mail, email, social media, outbound telephony and SMS platforms. The technology assists in selecting and grouping potential campaign targets, communicating the offer, measuring campaign results, and learning from the results how to produce more effective and efficient campaigns in the future.
Campaign management software not only enables companies to manage and execute automated and personalized campaigns, generating leads for sales follow- up, but also to generate, segment and manage contact lists, while simultaneously complying with privacy legislation.
Experimentation is a common feature of campaign management. Experiments can be performed on different messaging strategies or subsets of customers or prospects. For exam- ple, different cells of the recency- frequency- monetary value (RFM) matrix can be treated to different offers in order to develop an understanding of the propensities- to- buy of differ- ent customer groups. If the results were to show that women aged 15–25 were particularly responsive to a health- and- beauty bundled offer, you could search for prospects matching that profile, or buy additional lists to target.
Event- based marketing
Event- based marketing (EBM) is also used to generate new customers. EBM provides companies with opportunities to approach prospects at times that have a higher probability of making a sale.
In retail banking, an event such as a large deposit into a savings account might trigger an approach from the bank’s investment division. A name change might trigger an approach from a financial planner.
Many B2C companies can link purchasing to life stage events. For example, finance com- panies target mortgages at newlyweds and empty nesters whose children have left home.
Clothing retailers target different offerings at customers as they age: branded fashion cloth- ing at single employed females; baby clothes for new mothers and so on. If you can associ- ate purchasing with particular life- stage events you’ll be well placed to target your customer acquisition efforts.
Public events such as interest rate falls or hikes, tax law changes, and weather events or competitive events such as new product launches might signal an EBM opportunity.
For example, an insurance company might launch a health insurance campaign following announcements in the press of an upcoming influenza epidemic.
Support from CRM reporting and analytics
Clearly, these operational CRM tools have to be supported by sound customer insight to ensure that the right offer is made to the right prospect through the right channel at the right time.
Most CRM tools have standardized reports built in. However, sometimes the insights pro- vided by standard reports may not meet user requirements. In this case, more advanced ad hoc analytics may be required. It is often possible to query current customer- related databases for clues to guide customer acquisition. Supermarket operators can mine transactional data to provide insight into the baskets of goods that customers buy. If you were to find that 60% of cus- tomers buying frozen apple pies also bought premixed custard, you might think it worthwhile targeting the other 40% with an offer. A bank wanting to generate new customers for its savings account can develop a model predicting propensity- to- buy based upon current product own- ership. In the B2B environment, salespeople may have entered data about prospects’ satisfaction with competitors’ offerings into their sales call records. Those who are less satisfied will likely show a higher propensity to switch and may be worth targeting with an offer.
CUsToMER aCQUIsITIon
Affiliation data can also be used to guide customer acquisition. Customers may be members or otherwise associated with a number of organizations: a university, a sports club or a charity.
Affinity marketers recognize membership as an opportunity. Banks like MBNA have led the way in affinity marketing of credit cards. MBNA, the organization and the member all benefit from the arrangement. MBNA offers a credit card to members of the organization. The organization receives a fee for allowing the bank access to its member data. Members enjoy a specially branded card and excellent customer experience from the bank. Affinity groups include members of the World Wildlife Fund, fans of Manchester United and congregations of the Uniting Church.
CONCLUSION
Customer acquisition is the first issue that managers face as they attempt to build a profitable customer base. There are three major decisions to be made: which prospects to target; how to communicate with them; and what offer to communicate to them. New customers are of two kinds. They are either new to the product category, or new to the company. In principle, the