Customer Life Cycle
April 3, 2025
If in an organization, many customers diverge their way to other organizations and customer acquisition program shows less aggressiveness then the organization faces terrible cash flow problems. This is the time when tracking the number of customers in each stage of customer life cycle becomes essential. This helps the organization to determine the purchasing power…
Most of the organizations have murkiness in considering customer loyalty and satisfaction. They feel that both are same and a satisfied customer is always loyal to them. But this is not true as the customer can be delightfully satisfied but he may be or may not be loyal. This is because satisfaction an emotional and…
When customers end up his relationship with suppliers, he breaks the loyalty with him. Following are the reasons which are responsible for loyalty break ups: Customer dis-satisfaction: Customer dissatisfaction is the primary reason that results in breaking up the continued loyalty with the supplier. Most of the unsatisfied customers try to find more prominent alternatives…
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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