Customer Acquisition- At What Cost?Posted by Celeste
Customer acquisition is very important- but if you are bleeding money in order to acquire new customers, you will soon be out of business. Entrepreneurs often have difficulty in attaching value to their own hard work. Perhaps it is fear of rejection, perhaps it is a sense of camaraderie with the customer, or perhaps it is simply low self-confidence. Whatever the cause, lowball pricing in the name of customer acquisition is a terrible idea.
When all of the players in a given industry are priced in a certain range, there is likely to be a reason. Costs are the first thing that comes to mind. If your pricing is the lowball outlier, this says something about your company. In the case of construction, when a low-ball bid comes in, there is often the suspicion that the firm submitting the bid does not understand the scope of the work. In many industries, lowball pricing signals low quality work. Decide how you want to be seen by your potential customers.
When the opportunity arises to participate in a discounting scheme, many entrepreneurs get excited about the potential for acquiring new clients. The deal is supposed to go something like this:
- The company contracts with a discount club to provide a good or service at or below cost
- Members of the discount club try out this good or service at the discount price
- A percentage of these members are so impressed with the good or service that they become loyal repeat customers.
In reality, these discount schemes can backfire. People who are looking for big discounts are not often looking to do repeat transactions at a higher price. They have limited resources and are looking to get something for the lowest price possible- what better way to get that then through a club that gets you below cost pricing? Even if you could, would you truly want to acquire a customer whose transactions always result in your margins being diminished?
If you are truly pursuing a low cost strategy as a part of your overall marketing plan, the way to go about doing this is to make sure that your costs are low enough that you can actually pass savings along to your customers. To take your pricing down to a level that is unsustainable is a reckless strategy and is destructive to your business.
What are some sustainable customer acquisition tactics that you have tried?