Tuesday, 3 December 2013

Is the cost of acquisition justified?

Interesting article on what a start-up tried and the high cost of acquisition on various channels. There are a lot of services that will promise you ‘guaranteed’ leads in short term. You can spend a lot of $$ on Google Adwords, Zillow and CPC on other social media channels. As your competitors also enter the market the cost of acquisition of a customer becomes higher and higher. Marketplaces like Google, Zillow will use game theory to get people to bid the maximum amount and they will get most $$ of leads you get from them. Also in a lot of these networks when ad's are displayed on 3rd party sites there are a lot of bogus clicks which never translate into leads.
What is required in a longer term is a strong brand of yours that gets inbound leads rather than you purchasing them. Like in the case of real estate agents the question is how many homebuyers know about you even without you putting up Ad’s on these services to get leads.
Building a brand with longer term vision requires a lot of work but that is the only thing that will differentiate you from the others in the crowded marketplace. Do you have a strong online & social presence where you directly get the inbound leads from? If you have provided the best service to a customer have you made sure their testimonials and referrals are reflected in the brand you are promoting? If someone in your client’s network is looking for a home will they look for you over others? A strong brand comes with not only an exceptional customer service but also long term visibility to others from their network.
For services which are localized you don’t have to spend the same effort or budget as a big national services. You just have to be known as the best in your location even without putting up an Ad.  Even the budget you spend around lead generation should help you around brand building. Inbound leads are high quality and come for free. Purchased ones are costly and not sustainable as a differentiator.
Though marketplaces look like a quick way to put money and get leads if you know it others know it too. Over time the cost of acquisition will go up. If you are not working on building your brand, If people in your location don’t know about you without putting up a Ad, If you are not getting referral business from your network, think are you doing the right thing’s to build your brand?

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