This article is the second installment of our sustainable growth blog series, crafted to help financial institutions discover how to achieve lasting growth beyond the wins of 2020.
Today, we want to talk about how customer acquisition contributes to your growth engine, and how crafting a sustainable acquisition strategy helps you grow reliably over time, not just based on current economic conditions.
Let’s face it…acquiring new customers is difficult and expensive. Financial institutions can use many methods to acquire new customer relationships: broadcast media, direct mail, email, social media, direct sales, and more. Each of these methods have widely different costs per account acquired and achieve different response rates.
“The average cost of acquiring a new relationship can be anywhere from $250 to $500.“
We’ve all heard these numbers before, but high-level averages do not tell the whole story. Acquisition costs can vary widely based on your method of acquisition and type of account acquired as well as the cost of any incentives used to attract new customers.
Obviously, you must be able to measure the cost of acquisition by each marketing campaign. This lets you compare the different methods to see what is most effective. Measurement starts with identifying the source of new relationships. In modern marketing, this is called “attribution”. Simply put, attribution seeks to assign a new relationship to the touchpoint that led the customer to open an account.
Many financial institutions don’t have a good way of making this assignment. Others use custom fields in the core or account opening system to track what led a customer to open the account. However you do it, make sure that you are consistent so you can rely on this data over time.
Also, make sure that you don’t confuse marketing attribution with who opened the account. The point is not to assign points to individuals but to understand which acquisition campaigns are working and which ones are not.
If you understand attribution, you can track campaign response rates. This normally leads to cost per account and response rate as the main measures of success.
Go one step further
Measuring acquisition cost per account doesn’t tell the whole story. It may cost $500 dollars to acquire two different kinds of customers. One that will become a long-term, profitable relationship, and the other a single-service household gone too soon because a rate special expires.
The same cost can result in two very different relationships with very different profitability. It’s much better to consider the profitability of these relationship, including initial and ongoing costs. This lets you make the shift from measuring just response and acquisition cost to the profitability of the campaign.
Three Main Ingredients
An acquisition campaign is like a recipe with three main ingredients. They are listed here in order of importance:
- Copy & Creative
All too often, acquisition campaigns are not well targeted. Instead, financial institutions reach out to a wide variety of potential customers that have will have very different levels of profitability. This is one of the reasons that we prefer channels that allow you to specifically target segments that are the most likely to need your product and result in better relationships. This also results in lower acquisition costs because you are contacting fewer prospects.
The actual offer is the next most critical ingredient. You don’t have to be the best in the market to succeed, but you do have to be competitive. If you use incentives in your offer, make sure to have a plan to retain the customer once the incentive expires. Look for more on this in next month’s article.
Targeting can also help with retention. Targeting starts with understanding the behavior of your customers, including the ones that left after offers expired.
The copy and creative for your offer is also critical. This is a great opportunity for community institutions to differentiate on your brand.
Acquisition is more than response rates – it’s not always who responds that’s important, but how good a customer they’ll become.
Ad Hoc Acquisition
Community financial institutions tend to do acquisition marketing sporadically when they are trying to achieve a short-term goal (when they need new deposits.)
Simply running an ad hoc campaign comes with major challenges. It is difficult to improve if you only do something once. One-time campaigns don’t produce enough activity to gauge success. This leads to guessing and effects your future campaigns. It’s hard to improve the next campaign if you’re not sure how well the previous one performed.
A sustainable acquisition strategy must be an ongoing, repeatable process that builds upon itself. Sporadic marketing campaigns are a one-time tactic, while sustainable growth requires strategy.
For example, some of the most successful acquisition campaigns are done by credit card companies. We’re certainly not suggesting that community financial institutions need to become just like credit card companies, but there is something to learn from their strategy.
Because they consistently run acquisition campaigns, they have amazing data on their costs, response rates and profitability. They never stop at one offer because they know that the best response rate doesn’t come from the first contact. Their best response rates come beyond that first, second, or even third campaign. They never stop acquiring and using their results to improve.
Acquisition Best Practices
Strategy is all about deciding what you want to achieve and devising a plan to do it. As you already know, acquisition isn’t easy! Implementing a sustainable strategy will help your acquisition efforts succeed. That’s why we put together some best practices about everything you need to consider for your sustainable growth acquisition strategy:
- Know how to track responses – Whether you track attribution at account opening or through surveys, know how you are going to do it and be consistent over time.
- Measure, measure, measure – You must go beyond response rates and measure profitability. If you spend $5,000 on a campaign and gain a single account of a $1M, that’s a terrible response rate but a great outcome!
- Target first – Finding the right prospects affects everything else. You will spend less and get better responses. Click here to learn about intelligent targeting and why you need it.
- Expand the relationship before it’s too late – If you use incentive in your offer, have a plan that will help you grow these new customers before the incentive expires.
- Make your campaigns repeatable – If you really want sustainable growth, your campaigns need to be measurable, repeatable, and able to consistently bring in the right customers. Successful marketers know that the first attempt is not where they get the best results. Repeat successful campaigns and be persistent. Make sure to use data from past successful campaigns that worked.
- Avoid sporadic marketing – Understand that the type of campaigns you run become part of your brand. If you run random and sporadic marketing campaigns here and there, customers won’t hear what you’re trying to get across. Consistent marketing increases positive brand awareness and also saves you lots of time. Remember what we said earlier, you won’t ever really know how well your campaigns are performing if you start from scratch with each new campaign. Rinse and repeat!
Sustainable acquisition supports your growth engine
A successful and sustainable acquisition strategy clones your high-value customers—so you not only acquire more profitable and loyal customers, but also increase your customers’ lifetime value and aids retention! The best way to optimize a sustainable strategy is to recognize that each approach has an impact on the other, and to make sure that each complements the other.
Better acquisition is your first step to building sustainable growth. The next step is to improve retention for new and current customers.
Ready to acquire the customers you want?
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