It’s no secret that CRM tech can be expensive. You’d therefore be forgiven for feeling that it’s easier and far more cost effective to invest heavily in acquisition, rather than invest in tech which helps to increase lifetime value, cross sell opportunities and reactivate lapsed customers.
Sooner or later, you’ll need to do both – but this massively depends on where your business is at from a maturity perspective. From our experience working across industry sectors and a huge range of clients whose needs are all different, business maturity from a CRM perspective can be broken down into four “Market Framework Phases”.
Phase 1: Test the Market & Prove Your Unit Economics
This is where your “back of a beer mat” calculations are put to the test. Here, you’ll prove your CPA (Cost Per Acquisition) and get an idea if your margins are going to work. This is a short phase and you’ll know if it’s going to work or not within 6 months. Do you need to invest in CRM here? Absolutely not.
Phase 2: Scale Acquisition
Get to a large user base. Here, you’re acquiring as many users as you can and finding ways to get that CPA as low as you can, whilst still ensuring a good quality of user (no point in acquiring users for peanuts if they don’t drive revenue. You can however justify a higher CPA for users who do drive revenue). This phase can last as long as two years. Do you need to invest in CRM here? Not really, but you do need to think start thinking about it.
Phase 3: Retain Customers & Drive Back Book
You’ve acquired users and proved your model, what you’ve now got is a database full of people who have at some stage, and to varying degrees, engaged with your product offering. If you want to ensure sustainable revenue growth, this is where you need to invest in CRM.
Phase 4: Deepen Relationships with Your User Base
This is where you find out what your users different wants and needs are through A/B testing of content, channels and times when you contact your users. This phase is on-going, with no end. Only with considerable investment in CRM are you able to achieve this.
Think about which phase your business is in. If it’s phase 1 or at the beginning of phase 2, a business case for CRM investment is unlikely to be approved by senior leaders. However, if phase 3 is on the horizon, then now is the time to act.
In a future post, we’ll share how to frame your CRM investment pitch so you can get maximum buy-in from your Senior Leadership Team.
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