Managing Customer Acquisition

DR(C).SANDY WAHYUDI,MM,MA. BPU- UNIVERSITAS CIPUTRA

Definition of Customer Acquisition

The acquisition transaction perspective says that customer

acquisition ends with a customers first purchase It includes the 1st purchase as well as other nonpurchase encounters that both precede and follow the purchase, up until the time the customer makes a repeat purchase Once a 1st purchase is made, a customer may request service or other activities that impose further costs, this is part of CA. CA firms in new/ undeveloped markets in order to generate awareness and penetration of their products

The CA Rules
Rule 1: Acquire any customer as long as the discounted

future value of the customer exceeds the acquisition costs for that customer Rule 2: When you broaden the acquisition effort, be prepared for lower response rates Rule 3: The greater its profits from retention, the greater a firms customer acquisition investment should be Rule 4: The higher the percentage of the initial acquisition investment that a firm recovers in the first period, the greater its acquisition investment should be

The 4 Acquisition Strategies

Hig h

Low

Short

Long

CA Tactics: The ACTMAN Model

The ACTMAN: Acquisition Tactical Management 6 elements: 1. Targeting 2. Awareness generation and product positioning 3. Acquisition pricing 4.Trial 5. Usage experience and satisfaction 6.Post-introductory pricing and the creation of long-

term value for the product or service

The ACTMAN Model

Positionin g Targeti ng Awarene ss

Product/ service expectatio ns

Product/ service experienc e

Satisfacti on Repeat purchasi ng

Trial

Value

introducto ry pricing

Price expectatio ns

Price

THE ACTMAN MODEL

#1 TARGETING 1st degreeprofiling & regression scoring 2nd degree1st + statistical model 3rd degree self selection #2 AWARENESS GENERATION Direct MARCOM 1st degree Mass communication 2nd & 3rd degree Positioning is the act of designing the companys offering
and image so that they occupy a meaningful and distinct competitive position in the target customers minds

THE ACTMAN MODEL

#3 Acquisition pricing
Penetration pricing = price low to acquire customers and to raise prices later Introductory prices = should decline as a segments maximum retention potential goes up Retention pricing = when it is higher than reference price, customers are less likely to repurchase the product or service

#4 Trial
If product expectations are very high as a result of initial selling communications, and if the product fails to meet these expectations, the customer probably will not repeat-purchase, and the lifetime value of that customer will likely be low or even negative

THE ACTMAN MODEL

#5 Usage experience and satisfaction

- Product design and the provision of specified benefits - Post-purchase servicing of the customer

#6 Creation long-term value

- R&D teams manage product/service design - Operational staff control production & delivery - Customer service teams manages post-purchase

servicing

Methods & Tools for CA

Prospect database #1 Database and data sources Customer profile Causal marketing Computing CA equity Acquisition metric Profiling #3 Data analysis tools Regression scoring

Method & tools for Customer acquisition

#2 Metrics and accounting

#1 Databases and data sources for C.A.

Prospect databases
Prospect source, marketing contacts, promotional offers,

stage of sales cycle

Customer profile databases

Customer sales potential, characteristic, customer equity,

organization structure, key influences, competitors products used, customers attitude

Causal marketing database

Sales calls per customer, product/service offers, pricing to

customer, promotional offers

#2 Measuring and accounting for CA

Computing acquisition equity
1. Determine the number of prospect contacted 2. Measure the marketing & servicing costs 3. Determine the number of new customers 4. Compute the sales revenue & gross margin 5. Acquisition Equity (AE) = Step 4 step 2 6. Average AE per customer = step 5/step3

Acquisition metrics
1. Number of customers acquired 2. Acquisition rate 3. Cost of acquiring a customer 4. Total new-customer investment 5. The ratio of acquisition cost to acquisition equity 6. Total new customer investment as a % of sales & profits

#3 Data analysis Tools for CA

Profiling
1. 2. 3. 4. 5.

Regression scoring 1. Draw a random sample from the overall population of prospective customers 2. Obtain data from the sample that profile individual consumer characteristic 3. Initiate a marketing campaign directed at the random sample & record which

Collect demographic and profitability about current customers Append this information to each customers record in a profiling database Add behavioral & psychographic data to each profile Determine which variables distinguish the best customers, worst, nonresponders Use these variables to identify the highest potential prospects

individuals become customers 4. With that information, develop a regression scoring model

Conclusion

Managing acquisition strategies & tactics is vital

to creating, sustaining, enhancing customer equity The ACTMAN model has long-term implications for the customer-firm relationship Any acquisition strategy that fails to consider its long-term effects on retention and add-on selling is incomplete