Most marketers consider customer acquisition to be the most important metric, but is that true?

Customer Acquisition is considered to be one of the most important metrics for success.

It makes sense too. The more customers you have, the better, right?

However, in recent times, we have seen startups spending massive sums to acquire consumers only to go bust a few months (or years) later. In a way, they are incentivizing consumers in such unsustainable ways that those consumers don’t make a repeat purchase without a similar level of benefits.

These startups heavily rely on funding to continue acquisition. Instead of showing profit growth, they focus on revenue or user growth.

Unfortunately, without steady funding, those growths slow down. There have been cases where businesses had to shut down once they removed the artificial incentives.

Customer Acquisition Is Crucial- But Two Other Metrics Are Even More Important

The acquisition is not the answer. You must go beyond that level.

Customer Acquisition, without Customer Lifetime Value, is not that useful

How much money is the customer bringing in? That answer should justify the amount you are spending to bring in new users.

If you are making less than a customer is costing, then you are in a terrible situation. Either your marketing is just totally off, or the product is in an early stage of acceptance, or your pricing doesn’t work or your business model is suicidal.

Either way, it’s time to start from scratch and fix the money problem.

The other metric established companies depend on

A customer doesn’t make you money during her first visit. You have to spend tons on advertising, brand building, product development, shop decoration, etc. During the first visit, the customer hardly justifies her cost of acquisition.

For example, let’s consider your customer acquisition cost is $5. Your product price is $8. Your margin is $2 per product. If a customer purchases two items during the first visit, you make $4 in the margin. However, that’s lower than the customer’s acquisition cost.

What’s important to understand is- to make money from a customer, you have to make her a repeat customer. You have to encourage retention.

Most large-scale companies are large-scale because they have repeat customers.

iPhone works because of a loyal base. Playstations make money as gamers purchase games from the store. Avengers: Endgame made $2+ billion because many Iron Man, Thor, and Captain America fans came back.

Without loyalty, there’s no business. You have a transaction but that won’t make your company successful.

Remember, bringing a new customer is just the starting point.

You must be able to make money from that customer through repeat purchases.

Otherwise, you are just wasting your time and resources.

This article was first published in Marketing Meets Data publication.