Unless you’re among the few marketers who have all the time and money in the world to burn, you’re probably looking for methods to help you decide how get the most value out of your limited and precious resources. With customer acquisition top of mind these days, it’s important to have a way to decide where to spend your demand generation dollars. You’ve probably already come to the conclusion that the best place to spend it is on those customers who are most likely to buy. Many of our customers ask us if there is a relatively simple way to determine which customer segments to invest in.
And the answer is yes. There are two key metrics you can use to help make sure you’re using your demand generation dollars effectively. Customer acquisition and customer value. The two metrics when combined together can help an organization decide how much of your resources can be profitably allocated against a particular customer or set of customers. Create a 2X2 grid with one axis being customer acquisition cost and the other axis being customer value. Now use the following three steps to score customer and/or customer segments:
1.Create a Customer Value Score: To create a customer value score you will need information generated from two pieces of data – purchase frequency and customer revenue. To develop the scoring methodology, create a table that has a list of all your customers by purchase frequency and by revenue. Identify those customers who have high values on both columns. These are the highest value customers. You can develop a scoring process and create a score for each customer using these two criteria which will help you determine which customers you should target in order to maximize profit.
2.Calculate Cost to Acquire. For your list of customers, calculate your cost to acquire each of these customers. Customer acquisition cost is the cost associated with convincing a customer to buy your product or service, including research, marketing, and advertising costs. It’s an important business and marketing metric that can be used to gauge marketing’s performance.
3.Map Your Customers. Divide the 2X2 grid into 4 quadrants: High Value/High Cost; High Value/Low Cost, Low Value/High Cost, Low Value/Low Cost. Plot each customer into the appropriate quadrant.
Those customers and prospects similar to them in the High Value/Low Cost quadrant are where you should spend the money. Obviously very little, if any resources, should be allocated to customers and prospects in the Low/Low quadrant. You may have to have some internal conversations about the other two quadrants and applying the customer lifetime value calculation to these customers can often help guide decisions related to customers in these two groups. While it may take some time, this is a relatively easy affordable this three step process using these two metrics we recommend to help you determine resource allocation:
To learn more about aquisition and retention, allocating resources and lead scoring, please see:
Aquisition and Retention Solutions
Know Your Customers' Wallet Share To Retain the Best Customers.
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he things you will learn from the workbook include how to:
