Customer Acquisition – An ongoing and most important initiative
No matter if you’re a brand-new subscription business or you are a well-oiled, experienced subscription business, customer acquisition is a vital part of your marketing strategy. Acquiring new customers is a focus in any organization, but the potential value of each new customer is limitless in a subscription business. If you have strong customer retention initiatives, a new customer should stick around for a while and the longer they stick around, the more lifetime value they will create.
So, knowing that every new customer has huge profit potential, let’s get into creating a customer acquisition strategy.
Step 1 – Define and describe your customer acquisition strategy
Firstly, it’s important to note that your customer acquisition strategy is to be constantly developed and revised as results are evaluated and new ideas emerge.
The first step is to define your customer segments. Can all your customers be reached through the same sales methods, or would your acquisition strategy benefit from defining two or more separate customer groups which can be targeted differently? One common way to segment is to define customers as either consumers or businesses and develop separate business-to-consumer and business-to-business sales strategies. This may make sense for your business, or perhaps some other way of segmenting your customers may be more appropriate.
Another important aspect of your acquisition strategy is how to attract new customers. What incentives can you provide to convince potential new customers to try out your product or service? The ideal situation, of course, is for the value proposition of your subscription product to be so strong that no incentives are needed to convince new customers to hop on board! Most probably, though, you will need some kind of incentive to acquire new customers.
One of the most popular incentive schemes is the “try the first month free” offer adopted by a number of leading subscription businesses, including Netflix, Spotify, and many others. The catch is that when signing up for one free month, customers also agree that the subscription will automatically transition into a paid subscription after the free month unless they actively unsubscribe. This makes the free trial subscription a very effective way of acquiring new customers.
Whether you go for the free-trial method or choose to use some other kind of incentive to win new customers, you must ensure that subscribers on a trial are automatically rolled over to a regular subscription after the trial period to gain as many paying customers as possible.
Step 2 – Build your campaign plan
You will probably find that much of your time and resources are dedicated to the task of acquiring new customers, and all of these efforts will be constantly planned and evaluated in your campaign plan.
Basically, a campaign plan is a plan that tells you how many new subscriptions you plan to sell in each period, which channels you will use to sell them, and how much it will cost you to acquire each new subscription.
A central element of campaign plans is to choose the right sales channels to reach your audience. Sales channels are direct if they involve you selling directly to your customers, and they are indirect if they involve you selling your subscriptions through intermediaries such as retailers or dealers. Even though you might want to consider indirect as well as direct sales channels when it comes to your subscription business, it is obvious that most subscription businesses rely heavily on direct channels, since the subscription model by its very nature is a great way for businesses to sell directly to consumers.
Selling your subscriptions directly to customers could involve a number of different sales channels: company salesforce, direct mail, internet marketing, print/television advertising, telemarketing, social marketing, face-to-face marketing, etc. The list is long, and you need to consider which channels are most likely to fit your product, your customer segments, and your company’s resources and competencies, and then you need to test your assumptions to discover which channels are most effective.
However, one very effective sales channel is often overlooked and deserves a special mention. That is, using your existing customers as a salesforce to sell subscriptions to their friends and relatives. Consider Dropbox, which is one of the fastest-growing subscription businesses. Dropbox is a cloud-based file hosting service that lets you store and share data, pictures, and videos, and to access them anywhere. Dropbox has launched a very successful referral scheme, which encourages subscribers to promote the service to their friends and rewards them with 500 megabytes of extra storage for each new subscriber referred.
The referral scheme has proved to be a very powerful way of acquiring new customers for Dropbox, and you should seriously consider whether customer referral could be a good way for you to acquire new customers too. This is particularly worth considering because the referral scheme has a further benefit: It will not only win you new customers. It also functions as a way of building loyalty among your existing customers by rewarding their efforts as ambassadors for your product or service.
Step 3 – Implement the sales channels described in your acquisition strategy and campaign plan
First, you need to build and implement a campaign management tool that will help you keep track of all your campaign activities and continuously track and measure your sales performance. If you are a small business, the best solution is probably to build this yourself using a spreadsheet. If you are planning to build a large-scale operation, you will probably be better off choosing a standard solution from one of the many suppliers of campaign management systems.
Most likely some of your sales will come from selling online and using search advertising, e-mail marketing, social media, and other digital channels. Therefore, you need to build strong competencies in digital marketing, covering disciplines like search engine marketing (SEM) and search engine optimization (SEO) as well as other digital sales skills. This area must not be underestimated. The difference between a successful subscription business and a struggling one could very well come down to the ability of the business to attract new subscribers through the effective use of search engines and other digital sales channels.
No matter which sales channels you plan to use, one final consideration applies. In every case, you need to foster a strong sales culture in all parts of your organisation. Fostering a strong sales culture requires you to set ambitious and visible sales targets, constantly measure and evaluate your sales performance, communicate to everyone in your organisation, and constantly seek to improve on all your sales performance indicators.
Do not imagine for a moment that you have a product that will sell itself. A strong product will only succeed if you have a competent sales organisation and a strong sales culture in your business.