ProfitXL: Supersize Profits with the SHUVAM Framework (Part 6)


Acquisition of new customers remains the primary focus of most marketers today – at the cost of enhancing relationships and revenues from existing customers. With hotlines, unistack and VRM, marketers can flip the funnel – putting existing customers at the top. New customer acquisition will remain an important growth driver, but it needs to be done differently by making “near zero CAC” as the objective. There are three ways to sharply reduce CAC: referrals, reactivation, and BCG-influenced acquisition.

Referrals are where existing customers bring in new customers – based on word-of-mouth or via social networks. Marketers have to pay very little for such acquisition – hence the CAC is close to zero. If the referrals come from Best customers, it is even better – because Best are likely to beget  Best. A simple technique that marketers can use is to add a field to the sign-up form on who the referrer was for a new customer, and give a micro incentive to both. A good referral program augmented with authentic ratings and reviews can go a long way in increasing profitability.

Reactivation is another strategy to reduce CAC – because the alternative could end up being expensive reacquisition! Existing customers (especially the Test ones) end up becoming dormant for a variety of reasons: they did not find what they were looking for, their interests changed, or the brand communications were not engaging enough. Some in the inactive category could also have churned away to a different brand. The key to note is that there was a relationship once – which means the brand has some identity information (mobile number, email address) to reopen a conversation. Informative content which is helpful and not pushy can be a good way to ‘awaken’ the inactive base. AMP and Atomic Rewards can be useful aids for reactivation.

The third low-cost acquisition strategy is to use data about Best customers to target look-alikes. Most brands tend to either use the data of all customers which just leads to a lot of wrong customers being acquired who bounce from the website or uninstall the app shortly after installing it. Attributes and commonalities among Best customers can help sharpen targeting of new customers. Also, profiling tools could help identify the likelihood of the person being a future Best customer from the pool of Next customers. If that is the case, then marketers can ensure a superior experience in the early days to increase the chance of a longer and mutually beneficial relationship.

Once the revenue engine from existing customers starts flowing and growing, there is much less pressure on marketers to deliver on growth targets. They can thus be more judicious with the spending on new acquisition, especially with CAC rising 40-50% year-on-year. Reducing the ad spends (with concomitant AdWaste) and redirecting some of it to existing customers is the way marketers can grow the profits and play their part as Chief Profitability Officers.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.