What is Customer Satisfaction ?
April 3, 2025
Business always starts and closes with customers and hence the customers must be treated as the King of the market. All the business enhancements, profit, status, image etc of the organization depends on customers. Hence it is important for all the organizations to meet all the customers’ expectations and identify that they are satisfied customer.…
Human Resources are those constituents of an organization that take care of the human facets and needs of all employees within that organization. Key functions of HR in an organization are- Employee recruitment and selection. Compensation calculation and reward program management. In-house training for all employees according to skill sets. Performance calculation and managing employee…
CRM leverages and amplifies customer base of an organization through efficacious and efficient marketing. In fact CRM has brought up new dimensions in the field of marketing by significantly improving marketing functioning and execution. Intuitive CRM associated marketing strategies like direct marketing, web marketing, e-mail marketing etc. have been matured during the recent past. These…
Customer acquisition cost is the cost which suppliers invest to acquire a new customer. This cost should be always less than the overall value of customer in the entire customer life-cycle.
For example, if the cost incurred to acquire a customer is $10, but the contribution of the customer to the profit is only $9 till the life of relationship with that customer, then there is an obvious business loss.
Customer acquisition cost depends on way the customers are acquired. Lower the acquisition cost higher is the chance to increase return on investment (ROI). For accomplishing this, the following tasks should be followed:
The best approach to predict the customer acquisition cost is to calculate the overall investment on a product. For example, an organization sells a product for $100 which includes the manufacturing cost of the product (say $85) and the profit earned ($15 accordingly).
Now, the organization also spends $50 for that product in campaigns and advertisements. Hence to capitalize this $50, at least one customer must be acquired at $50. This will be the maximum customer acquisition cost for the organization.
However, the profits may further increase if the organization can acquire customers for less than $50, or when they sell the product at some higher prize. Although the above example is the simplest way to calculate the customer acquisition cost, there are following other important factors that affect customer cost:
For example, the car manufacturers know that their business does not come to an end only by selling a car to customer; extra accessories, enhanced warranties, lifetime financial relationship are also source of revenue for them.
If the customer is totally satisfied then chances of buying another car or replacing it with enhanced segment car is also commonly noticed. Paying off for high quality service and deems relationship with manufacturer, the customers act as brand ambassadors and refer other customers to buy.
The process of retaining customers like this will help the organization to gain more profit. Due to enhanced profit the capital could be shared with acquisition cost of customers by utilizing it more on advertising and campaigning events to attract more new customers.
If the selling cost of a product is $100, the manufacturing cost is $98 and customer acquisition cost is $100, then the organization is having an overall profit of just $2, which is substantially very less. If the organization manages to increase the profit margin, then they have chances to increase the acquisition cost and also profit.
The above two examples could have a substantial impact on acquisition cost of customers. Managing the acquisition cost of customers is the primary aspect to enhance the business and maintain relations with customers. Hence it is one of the most important factors that an organization should focus on.
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