With pressure on results, there are only so many ways that a company or brand can fill the gap. Along one axe, there is getting new clients while the other axe is getting more from existing clients. The former is known to be more expensive, the latter better for profitability. The former feels like an opportunity for longer term business, while the latter can quickly feel like pressing a tired lemon. The bigger question is: why are you looking for new customers?
Imagine you have a client base that looks like this:
In this case, the largest number of customers are not profitable, at least not at the outset. Once they become loyal, their profitability enhances… with a net net that is just marginally profitable. If you are looking for new customers because your topline is falling, then the bigger question is why revenues are not as anticipated? Because the answer is probably not (just) a lack of new customers. If new customers come onboard but, like the existing clients, they quickly abandon ship or not enough of them convert into loyal customers, then the cost of acquisition and the long-term value of your customers will both go in the wrong and opposite directions.
If the base problems aren’t fixed, companies with an acquisitive strategy may soon pay the cost of more expensive keywords, higher cost-per-acqusition and reduced funds for long-term brand building. And that can spell disaster.
Article first published on minterdial.com
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