Wednesday, August 24, 2022

7 Key Factors Obscure Your Customer Acquisition Costs

digital_marketingAs a business consultant and angel investor, I often ask for your own assessment of marketing ROI, or customer acquisition cost (CAC). While I realize that a high level of certainty in these numbers is an elusive goal, the value of doing the work, and benchmarking your business against competitors is well worth the effort. Are you making the proper investment, and is it paying off?

As I recently watched an episode of “Shark Tank,” I realized that the shark investors focus on your responses to these questions is also a credibility test on your business savvy, as it leads to other relevant questions on margins, channels, and your understanding of key customer forces.

Thus I was pleased to see this subject, and related strategy decisions, covered well in a recent book, “Brand Vision,” by Jim Everhart. Mr. Everhart distills his leadership insights from many decades in one of the largest business-to-business marketing agencies, working with companies across the country. I paraphrase here the key challenges he identifies, adding my own insights:

  1. Marketing ROI requires cross-enterprise information. Leaders and investors need to know if you have and are tapping into your key sources of relevant data, including web analytics, sales management data, and customer relationship management (CRM) software. We want to make sure you can break down the silos and manage to results.

    The current term for all these activities and results online is “content marketing.” It encompasses your marketing strategy used to attract, engage, and retain customers by creating and sharing relevant articles, videos, podcasts, and other media. Don’t forget it.

  2. Turf wars between people complicate assessment. If you think it’s hard to get the technical systems to talk to each other, I have found that it’s even harder to bridge the gulf between the various professionals who interpret them. You must have a strong Chief Marketing Officer (CMO) with a clear strategy for spending, and metrics to gauge results.

    Cultural or ideological differences cause the turf wars, which can destroy a company by creating political battlegrounds to make ROI and every cross-enterprise effort impossible. Your job here is to create and nurture a positive culture eliminating these difficulties.

  3. Rarely is there alignment between sales and marketing. In my experience, your biggest challenge will be to rationalize the disparate input from your sales and marketing organizations, who each want more resources and more credit for ROI. Here there is no substitute for independent analysis from experts outside the organizations involved.

    In addition, research shows that companies that fail to align their marketing and sales departments have less ROI, and lose 10% or more of their revenues per year. Your priority must always be to offer the right content with the right contacts along the way.

  4. Buyer behavior is difficult to predict and quantify. In all cases, you have to deal with a host of market intangibles, including brand identity and buyer preferences. I assure you of the need to really listen to customer feedback, both proactively in market studies, as well as after-the-sale reviews. Use these to set probability limits on apparent ROI results.

  5. Outside partners and channel impacts are complex. Of course, you need work with partners and channel to quantity their costs and contributions and normalize total results. In general, I have found that channel partnerships with value-added resellers are a great way to reduce CAC, as well as boost retention, and improve return on investment.

  6. Multiple marketing tactics seek to share attribution. What if someone sees an ad, visits a web page, watches a video, downloads a brochure, responds to an e-mail, and finally buys a product? You have to determine how to share these costs and credit. Here I recommend the use an outside consultant report periodically to avoid internal turf wars.

  7. Long sales cycles obscure beginning and end of costs. More empowered buyers have resulted in longer sales cycles. People no longer go straight to the source to make purchase decisions. With the internet at our fingertips, even B2B customers research and compare solutions, completing 50-90% of the work before a sales rep is contacted.

Sure, in some cases the ROI is simple, like spending $30,000 for a trade show to get 100 sales leads. That’s $300 a lead. Unfortunately, this fails to account for ongoing marketing efforts, so it’s up to you as a business leader to factor in all the complexities, both positive and negative. Your credibility and your business success is at stake, so I urge you to always be ready with specifics.

Marty Zwilling

*** First published on on 8/10/2022 ***



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