Do you know your acquisition costs?

Understanding and managing acquisition costs is a critical aspect that often goes overlooked. In this week's newsletter, I wanted to dive into acquisition costs.

A lot of people in organisations I speak to don't seem to have a full understanding of these costs, especially at branch level spanning across the sales and after-sales services.

Cost of Sales: A Deeper Dive

The cost of acquiring a new customer involves more than just the initial sale.

Consider the entire process, from marketing and advertising expenses to sales team compensation. Analysing these costs provides a holistic view of customer acquisition and the cost of doing a deal.

In essence, your total costs are divided into the total number of deals you do.

When we carry out this simple exercise it highlights a number that is always there to be beaten. Understanding this number also means that you and your team are more conscious about conversions.

After Sales: A Hidden Dimension

Beyond the showroom floor, after-sales services contribute significantly to costs. Warranty services, maintenance programs, and customer support all play a role.

Understanding upsells and conversion can help with your acquisition costs especially when you can identify the source and demographic of the enquiry. For most some of these post purchases can also become expenses and it is vital to try and get a complete grasp of the true cost.

Beyond the Obvious: Identifying Additional Areas

Don't stop at the obvious. Explore other areas that may contribute to acquisition costs, such as customer retention programs, loyalty incentives, and marketing campaigns tailored to existing customers.

A strong retention, referral, and loyalty program can drive your acquisition costs down by a significant margin.

There's no better source than happy customers to spread the word and they are always easier to sell to again. Done correctly and with a solid strategy this is and will be your lowest acquisition cost.

Drilling Down: Source and Conversion Ratios

Once the overall acquisition costs are identified, the next step is to drill down to the specifics. Evaluate the source of each lead and the conversion ratio from lead to customer.

This granular analysis is key to optimising marketing strategies and the key areas to invest more money into. It helps you double down on where the results are.

Understanding acquisition costs is not merely an accounting exercise; it's a strategic move to maximize return on investment (ROI).

Identify the channels that bring in the most valuable customers and allocate resources accordingly.

Management Insight: From Corporate to Branch Level

For effective decision-making, management must be aware of these costs.

Often, there's a lack of awareness at various levels. By breaking down these costs to branch levels, management gains insights that can shape better training programs and enhance overall understanding.

Ask your Sales Manager if he knows the best-performing advertising channel, its conversion ratio, and its cost to do a deal. Not many will know. FACT

Why? Because it's not deemed a concern for them to know, How do we expect precise returns from enquiry sources and conversion ratios at branch level when we don't share and empower this information?

Share, empower, and educate at a deeper level and it will find its way to getting better results.

Conclusion:

In conclusion, a profound understanding of acquisition costs is a cornerstone for success. Diving into the nuances of cost of sales, after-sales services, referral, retention, loyalty, and beyond enables businesses to make informed decisions that lead to optimal ROI.

Remember, knowledge is power, need any help drop me a message or book a call in my featured section.

Thanks,

Steve