How Much is that Customer in the Window? What customers are really worth Presented by: Jan Triplett CEO, Business Success Center Business Success Center. | 7600 Burnet Rd. #130 | Austin, TX 78757 P: (512) 933-1983| E: email@example.com | www.bscusa..com
All Customers Are Not EqualSome cost more to getSome cost more to keepSome add valueSome take away value
Customers Are Acquired When They spend MONEY Not just inquire or respond to an ad or push
CAC Cost Are More When….. • Just taking your entire cost of sales and inbound and outbound marketing over a given period, including salaries and other related expenses • Dividing that by the number of customers that you acquired in that same period. • You must include earlier attempts to get those customers & non-sales & marketing costs.
Why It’s Important to KnowValidates (or shows what needs to improve) Pricing Business Model Sales Strategy Product MixAttracts fundingImproves sales
Not So Simple CalculationPlatinum Customer LTV (Lifetime Value) CAC (Cost of Acquisition)Radio Active Waste Customercosts the most, provides the least More Value, Less Cost
Cost of Online vs. Brick & Mortar Customers Customer acquisition costs are much higher for Internet retailers ($82 per customer) than for brick-and-mortar retailers that sell across multiple channels ($31 per customer), according to a survey of 221 retailers conducted by Shop.org .
Good Results CAC X3 < LTVCAC should be recovered by sales to that customer in 12 months
CAC Cost•Increase if •Learning curve •Wrong customer focus •Changing business game or model •Unclear vision; wrong positioning; wrong marketing •Wrong product, product mix (what else can the customer get from you) •Poorly trained staff, delivery system, admin •Bad sales strategy •Freebies out of control & not accounted for •No tracking, evaluation, and changes •No warning system when things going wrong
CAC Cost•Decrease if •Right customer focus (Platinum) •Connection connectivity •Products & Services with appropriate benefits & features •Effective, trained staff •Strategic alliances; channel partners •Good sales strategy; good marketing efforts
LTV Revenue Customer Lifetime Gross Of Margin RelationshipSubtracts all support, installation, and servicing (including portion of the upgrade) costs.
7 Touches•Most sales still made after the 7th touch •Include all “touches” in your calculations •Include testing costs as well as out of pocket costs
Decrease in LTV• Unhappy or dissatisfied customers• High customer turnover• High customer employee turnover (depending on the product or service you provide)• Lack of good customer information
Increase in LTV• Suggestive sales strategy – product line that supports & encourages that• Improved customer relations• Product improvement based on customer wants
Look At Your Customers •Start measuring their true total costs •Be as accurate as you can •Include everything relevant, not just sales & marketing, including R&D, testing, trials, previous attempts •Start measuring their value in terms of •Revenue, ideas, QA, connections, referrals •Re-order & prioritize them from Platinum to RAW Adjust what you do to get and keep customers. Try to lower costs & increase revenue over time. Train staff to cross sell & upsell