Customer Acquisition and Segmentation

Customer acquisition; Whether you sell products or services at some point you will need to thing about how you get customers or clients. There are of course,many issues to be considered. Clearly there a number of issues to think about. Many of the broad themes are included in the familiar Buying Cycle:

customer acquisition

The Buying Cycle

 The five main headings are all fairly self-evident.

  1. Awareness : customer identification of a need and the realization that your business can potentially fulfill it
  2. Research : customer evaluation of how your offering meets this need, including the evaluation of other offerings.
  3. Comparison : a customer’s logical and emotional inclination towards one solution or another, ultimately leading to a purchasing decision
  4. Purchase : The action of ordering and buying
  5. Retention: The emotional and logical process that (hopefully) leads to a repeat purchase and a loyalist.

 

 

But in this blog I want to take a step back and try to determine in very broad terms the answers to some crucial questions for any marketer or business owner when they are thinking about customer acquisition.

  • What does make people switch?
  • What is it that makes someone change their mind or their behaviour?
  • How can my company “encourage” the process.

Classification of customers

The diagram below provides an example of a way to determine where your product or service lies in a potential customer’s mind. This is a Business-to-Business example but it is easily adapted for a Business-to-Consumer environment.

Customer acquisition

Purchase Matrix

 

The starting point for our understanding of “what would make them switch” (key to customer acquisition) is to recognize that there are different groups of people with different needs in our target audience. It would be an unusual situation for everyone to be motivated by the same things. (It would also make for a rather boring world, but that’s a subject for another blog!).

  • In the bottom left quadrant is the “paper clip” representing products that are of low value and that are not strategic to the buyer’s
  • future. In the top left corner is the “electricity” quadrant, representing undifferentiated products where the annual spend may be quite high but the supplier could be any one of a number of reputable companies.
  • The “consultancy” box in the matrix represents an interesting group, as here we have suppliers who may not cost too much  but who certainly have a strong strategic input on any future success. (In the interest of full disclosure this is my box!
  • In the plant and machinery group there are suppliers of products and services such as plant and machinery that are strategically vital products and account for a substantial amount of their costs.

The behaviour of “buyers” in each of these segments is very different.Therefore the approach you take to customer acquisition in each segment will also be very different.

The buyer of paper clips wants paper clips that don’t break, and probably wants someone who can operate as a one stop shop for all office supplies. But, in all probability, they may not know too much about paper clips and how they are made. They will be more influenced by the care and attention given by the sales person who calls regularly and remembers their birthday with a bunch of flowers.

Contrast this with the buyer of “electricity”. This is the commodity box where the products on the shopping list account for a substantial expenditure but where there is very little differentiation in the buyer’s eyes between suppliers. Products in this box are always subject to price pressure as this is the most obvious lever that prompts switching. In fact, it is a box of opportunity where the clever marketer can explore customers’ needs and add services that create a “lock-in”.

Companies that supply strategically important products or services (my area, you will remember!)  are generally regarded as specialists. The “brand” of the supplier is likely to be important, especially if they have a reputation in a field. Personal relationships are also a major influence. This is very much the “who you know” / reputation area.

Finally, companies buying products and services that account for a significant spend and that are also strategically important are reluctant to switch to another supplier. A switch may take place but only after careful consideration of the consequences of the move. Airlines for example do move to new suppliers of aircraft but they have to carefully weigh up the effect on spares management, maintenance, crew training and customer preferences.

Customer Acquisition

So where does all this leave us in terms of Customer Acquisition? I think simply put, I am suggesting that you need to understand the importance of any particular purchase decision for any particular segment of customers. If you can put yourself in their position and understand at least some of their concerns, constraints and motivations, then you will be able to determine a strategy and tactics to get them to switch.

As many of my themes, this is not complicated, but this foundational groundwork of customer acquisition is often forgotten..

 

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