Balancing Customer Acquisition and ROI
Many companies run simulations, comparing how a business will grow when managing break-even customer acquisition activities vs. activities calibrated for a one-year payback vs. activities calibrated for a two-year payback. A business grows much faster when accepting a one- or two-year payback. Profit grows faster when accepting a one- or two-year payback. Profit, as a percentage of net sales, is greater when managing customer acquisition activities to breakeven or better.
There’s nothing wrong with cutting customer acquisition activities down to breakeven or better, especially if cash is tight. If you can afford to spend a little bit more, balance the short-term loss with the long-term profit your newly acquired customers will generate.