Improve Customer Acquisition Costs with a Killer Marketing Strategy

Red JavelinMost companies view marketing as an expense item.  In fact, we’ve seen a number of companies scale back on their marketing efforts to hire more sales people with great contact lists. That works until they have exhausted their network. Without a strong marketing program, your sales team is going to have limited reach.

That is where marketing kicks in. Marketing is all about extending your brand’s reach and paving the way for the sale.

I recently had a conversation with the head of sales of a mid-size manufacturer about his high cost of sales. The products they sell are complex and have long sales cycles. The company sells through an indirect channel as well as direct to end users however they want to sell more direct and weed out the players in the channel that are not likely to embrace Industry 4.0 technology.

Sound familiar?

He had heard that digital marketing could help reduce his COS however, he wasn’t clear how that would work or where he would get the budget to do that.

This disconnect is very common in organizations that view sales and marketing as two separate and disparate functions.

 

Customer Acquisition Costs (CAC)

 A company's CAC is the total sales and marketing cost required to earn a new customer over a specific time period. 

CAC = Cost of Sales and Marketing divided by the Number of New Customers Acquired

Here are typical customer acquisition costs by industry. Consumer-based industries that  have transitioned to online marketing like travel, retail, and consumer goods have lower CAC. The more complex products have a higher CAC. (Source)

The first step to lowering your CAC is to ensure that marketing and sales are aligned.

Aligning Marketing Goals and Sales Goals

Marketing has two goals: one is strategic and one is tactical. The strategic goal is to raise brand awareness using branding activities and thought leadership. The tactical goal is revenue generation – specifically to generate and nurture leads consistently through the sales funnel.

Sales is responsible for bringing in the revenue. Period.

A recent survey of 721 sales reps found that the average rep spends 35.2% of their time selling and 65% on everything else, but not selling. The average field sales rep is paid $105,482 a year. If 64.8% of the time is spent on non-revenue generating activities, the typical company spends $68,352 per rep per year to pay him or her for tasks they were not hired to do.

Your sales team doesn’t have the time to spend nurturing leads who aren’t yet ready to make a buying decision. Sales resources are limited and need to be solely focused on driving revenue.

If sales and marketing are not aligned, then neither of the organizations will be optimized for success. If marketing is primarily tasked with raising brand awareness, chance are the cost-of-sales is high. If marketing only performs sales related marketing, then chances are the company is not perceived as a market leader.

Raising brand awareness, generating leads, and closing business all need to be closely aligned for the company to be successful and for the sales and marketing organizations to be operationally efficient.

Sales is the Last Mile 

What do we mean by the last mile? In the communications industry, the last mile refers to the last leg in delivering television, cable, and phone services to the end customer. In the logistics industry, it means moving product from a high capacity freight station to its final destination – whether it be warehouse or retail outlet. The term is applicable in all commercial industries – and it this case, we are using the term to refer to the product journey. Companies develop products, produce products, launch product, and sell products - sales is the final step in the product journey.

As products and services become more complex, incorporating more and more technology, the number of customer touchpoints increase. With the old advertising rule - the Rule of 7 - businesses relied on roughly 7 touchpoints to drive customers and prospects down the sales funnel. In today’s marketing landscape, it takes anywhere from 13 to 20 touchpoints to convert those prospects and customers, depending on your business/industry. Consider these statistics.

  • High growth organizations report an average of 16 touch points per prospect Source
  • There are now 21 Influencers in the technology buying cycle Source

 I love receiving cold calls – said no one ever.

When marketing passes qualified, sales-ready leads to the sales department, sales close more deals in less time Source. Without that, the close rate is lower, the sales cycle is much longer, and the cost of sales is significantly higher,

 

The Power is with the Buyers

In today’s market, sellers don’t control the flow of information, and therefore, don’t have the power they once had. Consumer buying behavior has fundamentally changed the way people buy in B2B. Depending on which statistic you want to believe, anywhere from 67-94% of the B2B buying cycle is already conducted online. If it is hard to get information or buy from you, the buyer will move on to your competition.

This is why you need the inbound marketing methodology. The inbound methodology integrates all the available online marketing tactics into a cohesive and measurable program.

Inbound marketing is a holistic data-driven approach of attracting, engaging, and delighting people to grow a business that provides value and builds trust. It helps brands attract, convert, close, and delight customers online by using content to educate prospects through the entire buying process.

The premise of inbound marketing is that prospects will be attracted to your content and come to you rather than having marketers competing for their attention.  With inbound marketing contact names are “earned” meaning prospects have come to you because they are interested in what you have to say.

Inbound Marketing Helps Focus Sales Efforts

Content marketing and lead nurturing are just two of the components of the inbound marketing methodology. With 65% of a sales rep's time spent on other activities other than selling, content marketing and lead nurturing can offloaded by using marketing automation. Both of these activities working in concert are able to further qualify leads prior to passing them off to sales thus reducing the time sales has to spend on qualification.

For example, let’s revisit the conversation I had with head of sales of a mid-size manufacturer about his high cost of sales. How can inbound marketing help focus his sales team and reduce his sales costs?

With the new products incorporating Industry 4.0 technologies on the horizon, how can the sales team reach tens of thousands of customers, OEMs, and integrators and determine if they are ready to adopt/sell the next generation products?

The short answer is – with a content marketing campaign.

  • Develop a series of content that educates on the value of IoT-integrated products and the benefits it brings to the customer’s organization.
  • Amplify that content using social media, media relations, and advertising to bring bet-fit prospects to your website.
  • Create a series of email campaigns targeted at your customer base and sales channel. Lead with value and then follow up with what and how.
  • The level of engagement with your campaign will allow you to segment your audience and help determine the readiness of your targeted base on adopting the next generation products.
  • Focus your sales resources on the highly engaged customers/channel players and nurture the laggards over time.

Inbound Marketing Lowers CAC

In recent surveys conducted by HubSpot, businesses consistently reported that the cost per lead for inbound marketing is at least 60% lower than the cost per lead for outbound marketing. Here are more stats that prove that inbound marketing works.

  • 68% of B2B customers prefer to research independently
  • 90% of searchers haven’t made their minds up about a brand before starting their search
  • Only 29% of people want to talk to a salesperson to learn more about a product, while 62% will search online
  • 47% of B2B buyers view at least 3 to 5 pieces of content before deciding to speak with a sales rep. This number increases to 8-12 pieces of content when technology is involved.
  • 79% of B2B marketers credit email as the most effective distribution channel for demand gen efforts
  • The most successful B2B marketers spend 40% of their total marketing budget on content marketing
  • 55% of marketers say blog content creation is their top inbound marketing priority
  • Inbound marketing generates three times more leads per dollar than traditional methods
  • Businesses that nurture leads make 50% more sales at a cost that’s 33% less than leads that aren’t nurtured
  • Content marketing gets three times more leads than paid search advertising

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Tags: Marketing tools, Inbound Marketing, Manufacturing