There are three major management activities: acquiring new customers, retaining existing customers and developing customer value. Acquiring new customers is the
first and the most important steps by company in order to customer lifecycle.
Majority companies do the acquisition strategy in order to replace the lost customers;
if they do not do it, then, their business will always experience decreasing number of customers, yet the worst thing, bankruptcy.
Moreover, existing customers may no longer use your products for several reasons, or may called natural attrition; hence, replacing them is the best way to keep company in the right track to grow. Acquiring new customers begins with targeting the right potential customers, continued by possible strategy to approach them include what products or services to offer them.
Talking about new customers, there are two kinds of customers, new-to-categoryand new-to-company (Buttle F. , 2009).Customers who have classified new need or entry new category are included within the first type. New couple with child just entry the kindergarten is one example of new-to-category customers. Besides, customers that are new-to-company generally leave the old one and then switch to the new one.
Mostly, company chooses to acquire more new-to-company customers as it is the only option to raise number of customers. Consumption of consumer goods, for instance, can be a simple example how customers could switch from one brand to another brand for several reasons. Due to customers’ switching habits, acquiring new-to-company customers can be more expensive than another one since their
company is able to offer a way better quality and value, it could be more easily for attracting them.
B2B leads, promotional activities can also be formed as exhibitions, seminars, trade shows and conferences as well. They generally do little advertising placed in highly- targeted specialist media such as trade magazines.
One of the popular strategies that can be profitable and productive for the company is building company’s website. With quite low penetration rate of internet users, around 16.1%, Indonesian population still become market potential since there are “only”
39.6 million users out of more than 200 million people here (TeknoJurnal, 2011).
With huge number of internet users and its possibility to access the internet more easily at this moment, the company’s website should be one tool that can connect company and customers, both existing and future customers.
The websites is expected to provide detail information about the products or services and once potential customer requests for more information then it usually require his name or email address. From this, the company, the direct marketing particularly, is able to contact him through email or phone (if any) to offer possible product according to his needs. This way is way much cheaper than using the salesperson, particularly if it is aimed for B2B or for the company.
For B2C customers, advertising becomes main thing to be considered whenever the company wants to run the acquisition efforts. Potential customers need to be made
aware of the products and the benefit within it. There are also some critics about ineffectiveness of advertising as the message within it mostly directed to the existing and current customers.
Within the acquiring strategy, there are three key performance indicators (KPIs) for customer acquisition activities. They are as follow:
1. How many customers are acquired?
2. What is the cost per acquired customer?
3. What is the value of the acquired customer?
From these indicators, the result is expected to be the low cost program but produces lots of highly valuable customers. This ideal result hopefully fulfills the company’s expectation of attaining more new customers. Theoretically, customer referral schemes also known as CRS seems to be very cost effective methods as it costs less expensive than create advertisement to attract customers. Poor quality and wrong delivered message advertisement could be boomerang for company as the customers who have successfully acquired would not stay for longer time, means, if they get a better product then they will leave the company.
Example: in a motoring membership organization, member-get-member scheme has a direct cost per new customer £22, compared to £100 for direct response television and £70 for door drops. A telecommunications company report that it costs £52 to
win a new customer through its recommend-a-friend program, compared to an average of £100 and advertising-generate costs £200 (Buttle & Kay, 2000).
In the case of insurance companies, life and non life insurances have two different products, which sometimes bring them into different strategy of acquiring new customers. In non life insurance, the product expires annually while life insurance is absolutely expires more than one year. Derived from this fact, non life insurance commonly offers repeated purchase strategy by suggesting them cross-selling or up- selling products.
Acquiring new customers is one of insurance company’s strategies that have effectively increased not only number of insured people, but also its profitability. By selling insurance policies mean the company is trying to attract new customer to buy its product with new promotions, advertising, more time for explaining the business, commission of agents, etc, which indicated also more budget requirement.
Several strategies have implemented by insurance companies in order to attract new customers, such as offering new products that expected to satisfy customers’ needs, offering new promotion events or advertising to attract their attention, etc.
However, even the retention strategy comes with several benefits but still customer acquisition becomes the most primary marketing goal (62%) while customer retention only takes part 14% as marketing goal (2009). Yet, based on marketers worldwide, new customers’ acquisition still takes biggest part the importance of
advertising goal. Companies focus on customer acquisition even though it can cost 6 to 7 times more to acquire new customers (Flowtown, 2010).
Even so, new customers are the most expensive and hardest to get as the company needs to spend more time, money, and energy to attract them through company’s agents. In PT. X, sales distribution or agents still become their number one strategy to acquire new customers. It is one of the most costly factors in the business, thus, derived from this fact, acquisition customers still turn out to be the most used strategy by insurance companies.
Though, companies are expected to avoid mistakes commonly done while they are trying to attract new customers. The biggest common mistake is by lowering their selling price just to get customers’ attention but they do not realize that it forces them into business failures (Tinney).
In order to meet the goal of this acquisition strategy, the company should decide carefully which prospects that suitable and match with company’s ability and needs and which one is not and should be eliminated. It does not always need big improvement as sometimes the small one would be adequate to increase the profit.
Company should review and analyze the data or information suspiciously to observe deeply about the opportunities of cross-selling or up-selling that could be ran by companies (Tinney).