Posted Oct. 2 2018, 01:15:32 pm

Nick Sargent

Director of Digital Strategy

Top marketers don’t just focus on leads – they set customer acquisition goals that plan for customer churn.  

Every week, we talk with CEOs losing patience with their marketing teams and their failure to enact a clear customer acquisition strategy. They describe how they tune out when marketing presents their results about website visits, Facebook engagement, or even new leads. They really want to hear about marketing’s impact on numbers that matter: customer acquisition and revenue goals.  But too many marketing teams fall well short of their C-Suite’s expectations.

In my blog “What is Growth Marketing and Why Should We Care?”, I explain how growth marketing contributes to a company’s customer acquisition strategy and revenue goals. By building marketing plans and goals across the customer journey, high-performing marketers identify more buyers, qualify better leads for sales, and keep customers happy so they come back again and again.

To meet your C-Suite’s revenue expectations, it’s important to set goals for your customer acquisition strategy that account for customer turnover, new customer acquisition and current customer growth. In this blog post, we’ll guide you through the process.

Start with a Customer Acquisition Strategy that Accounts for Churn

You’re the CMO for Acquire Inc. Your board just set aggressive growth goals for next year:

  • Last year’s revenue: $100 million
  • This year’s revenue goal: $115 million
  • Net new business to meet next year’s goal: $15 million

Eager marketers often see numbers like these and say: “Alright $15 million in new business next year – 15% growth! That’s doable. Let’s get to work!”

But new customer acquisition serves two purposes –growing revenue through new customers and also replacing customers who leave.

Average rates for customer attrition, also known as “churn”, vary by industry. The average annual churn for B2B is 24%, while B2C averaged 31%, according to a 2016 survey by software company Zuora.

Work with your sales team to determine your historical attrition rates for at least the past year (two years if possible). Your own data will give you a much better benchmark for customer turnover. Depending on the size of your company and the diversity of your products and services, consider breaking out attrition rates by product/service lines to understand the difference between them and customer value. This will help you set better customer acquisition goals and prioritize where your team should focus its time and resources.

If attrition rates are high, you’ll be working hard just to replace the customers who leave each year.

Let’s go back to Acquire Inc.:

  • Last year’s revenue: $100 million
  • This year’s revenue goal: $115 million
  • Expected recurring revenue for this year: $60 million
  • Net new business needed to meet goal: $55 million

Taking customer churn into account, suddenly, that growth goal seems a lot more daunting. For Acquire Inc.’s marketing team, if this high turnover is uncommon in their industry, they likely need to improve their customer retention strategy before running like mad to plan for growth. More time and resources dedicated to the onboarding and customer management process could make a huge impact on customer retention and make the customer acquisition goal easier to meet.

Learn more about marketing’s role in customer retention in on our next post: Revenue Retention and the Role of Marketing. Subscribe here to get it delivered straight to your inbox.

Setting Customer Acquisition Goals for New Customers

Marketing and sales both need to bring in new customers to meet the acquisition goal. If Acquire Inc. needs $25 million in revenue from new customers to meet its growth goals, how should sales and marketing split responsibilities to reach their collective goal?

There are several factors marketers should look for including historical performance, industry benchmarks and dedicated personnel.

1. What did marketing contribute to revenue last year? Hopefully this is easy to determine because you’ve put the technology and measurements in place already. If not, welcome to the club. As more marketers feel the pressure to report ROI for their efforts, they’re finding it challenging to cobble the numbers together from existing measurement and tools. Configuring your marketing automation system and CRM well can make it easy to measure that impact, even in real time. If your current systems don’t make it easy to determine multi-touch attribution, the value of each measurable interaction with your company (e.g. website visit, email open, download, etc.), you should look at revenue in at least one of two ways:

First Touch: Customers whose first touch came through marketing. This is often the best measure for marketing teams emerging in revenue attribution measurement, particularly, if your company’s products or services require high touch from sales.

Last Touch: Customers whose last touch came through marketing. For e-commerce buys, that’s a last touch before a sale. For B2B organizations that require a sales person to close a deal, it’s the last touch before an opportunity is created in the CRM. 

2. Look at industry benchmarks. For net new customers, marketing typically contributes 15 – 30% of new customer revenue, according to the Sales Benchmark Index (SBI). Some marketing-focused companies claim as high as 60%.

In the case of Acquire Inc., their revenue attribution measurements aren’t strong. Based on first-touch attribution, the marketing team delivered $10 million in revenue last year – or 10% of it’s $100 million in sales. Depending on the team’s capabilities and opportunities for improvement, next year the CMO may want to set that goal between 10-15% with a long-term goal to grow to 25%.

3. Align with your sales team on the goal split. High-performing growth marketers already have great relationships with their sales team. So, it’s no surprise that the customer acquisition goal should be a collaborative effort. This is really important if your team wants to increase marketing’s contribution to revenue over the previous year. That likely means increasing the number of leads for sales. They need to know more leads are coming, and you need to know what a qualified lead actually looks like for the sales team.

Marketing’s Contribution to Revenue Goes Beyond Your Customer Acquisition Strategy

It’s not hard to prove that marketing plays a significant role in revenue generation – from customer acquisition to customer lifetime value (CLV) and monthly recurring revenue (MRR). We’ll talk about CLV and MRR in next week’s blog, but in the meantime, check out our Ultimate Growth Marketing Playbook to learn how growth marketing can transform your business.

Information Sources

Zuora Press Release : Subscription Economy is Growing Nine Times Faster Than The S&P 500

Sales Benchmark Index: LeadGen ROI: Calculating Marketing Contribution to Sales Revenue

Resources

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