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Counting Customer Cost

Counting Customer Cost


Dictionary.com defines acquisition as:

The purchase of an asset such as a plant, a division, or even an entire company.

What do you do with an asset?

Maintain it so that you can get the most benefit from it for the longest period of time? If the asset were a building, you’d ensure that it retained its value, you’d repair it, you’d carry out preventative maintenance to stop expensive things going wrong.

How would you go about acquiring an asset?

You’d search and evaluate each opportunity and judge it on its merits. Does it fit well with my needs? How much will it cost me to maintain? What’s the return on my investment? How high is the cost of acquisition?

What if a customer or a new market were an asset?

Before considering any acquisition, you need to consider the cost. How much is that asset worth? If the annual spend for that customer is £1000 and there’s 20% gross profit in it, that sounds OK. But what if that customer was really demanding and you spent a whole day pitching the sale, and three days’ on customer service in the first year alone? Counting customer cost is important.

Consider this sum:

Return on Investment (ROI) – Total Cost of Ownership (TCO) = Asset Value

Somewhere below the asset value is what you can justify spending on the acquisition, and this figure differs from business to business and from market to market.

Before undertaking any business development or marketing activity, you need to define what you can justify as the cost of acquisition.

Now, it may be that in your market, customers are buying high-value goods and spending a lot of money with you over a three-year period. You might well justify inviting that potential customer to an exclusive sporting event or two, but if your local customer is just going to buy one book from you, that isn’t going to work.

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