In today's competitive business world, companies need to be financially efficient to stay ahead of the game. They are constantly driven to recoup Customer Acquisition Costs (CAC), which is the money they spend on marketing and sales to win new clients. And how quickly they do this is known as "CAC payback."
As a metric in itself, CAC payback is also a key enabler of financial efficiency and success. It is calculated by dividing the total amount of money spent on customer acquisition by the revenue generated from those customers during a specific period. Companies that reduce the CAC payback period have better results in terms of revenue and profitability.
But when it comes down to leveraging CAC, “one size does not fit all.” Companies turn to streamlining sales processes, optimizing their pricing strategies, and boosting customer retention while missing out on sizing and segmenting prospects for optimal sales resources.
The Low-Hanging Fruit for Improving CAC Payback
One size does not fit all
According to Thomas Dziersk, CRO at communication automation firm IntelePeer, the number one mistake that he has seen firms make time into time again, whether intentionally or accidentally, is using a one-size-fits-all approach to sales. This approach is problematic because sales processes for small, medium, and large deals are fundamentally different and require different levels of resources and sales motions.
By not segmenting prospects, businesses end up spending too much money to get little deals and don't have the time, energy, and sales motions to win big deals. In this regard, “businesses must establish different sales process teams for each deal size and segment prospects by industry and vertical to optimize language, content, and workflows,” Dzierk asserts.
Hyper-targeting is key
The second key mistake is not hyper-targeting your sales and marketing efforts. According to Dzierk, “By identifying your ideal customer profile (ICP), you can pick your go-to-market vertical segments carefully so you can own them.”
“When organizing sales and marketing processes, it's essential to segment prospects by industry and vertical and tailor your messaging and approach to their specific needs. For example, the sales process for healthcare prospects should differ from the sales process for finance prospects," he says.
Segmenting ICP by Vertical
Segmenting ICP by vertical is crucial, as each vertical has its own unique scripts, use cases, case studies, and ROI. Dzierk says, “The vertical language must be right, and the customer must feel you understand their business,” as each vertical requires different app integrations.
“Businesses must develop touchpoint relationships, as the buyer decision process, decision maker, and influencers all differ for each vertical.”
Size Sales Process Teams: Small, Medium, and Large
Dzierk asserts that it is important to establish different teams for each when it comes to sizing the sales process teams. “This will help optimize the sales process for each prospect's ACV, ensuring that companies do not spend too many resources for a small payoff. The sales process team should be scaled based on the size of the prospect's ACV.”
When it comes to different deal sizes, he suggests that businesses should organize their sales and marketing processes accordingly:
- Large deals: These are the whales that can drive most of your revenue. Each one needs focus, time, and attention.
- Medium deals: These should be a cookie-cutter approach. They can be outbound, but they need to have bounded resources invested per deal.
- Small deals: These are largely inbound/transactional. They should be low-touch with optimized workflows.
How Sales Motions Differ by Deal Size
According to Dzierk, companies must not forget that sales motions differ by deal size as follows:
The Enterprise Playbook
Now that you have freed up your enterprise salespeople to focus on large deal opportunities, they’ll have the time and resources to invest in the enterprise playbook. Here are some sales motions that will bring in the big bucks.
- Know your customer: focus on resources and learn the psychology of each customer segment.
- Focus on scale-up: make each deal bigger.
- Move up on the prospect: climb the leadership hierarchy to learn their needs.
- Ask for favors when you give favors: “Since I am doing this for you, I would like you to do something for me - please introduce me to xxx."
- Mutually Agreed Action Plan: a formal document outlining the process each seller must take for each step we take.
- Introduce the plan to prospects early in the cycle.
Growing Deal Opportunities
To grow deal opportunities, businesses also must:
- Move from monthly to upfront if relevant.
- Enterprise deals - grow deals by increasing the value to the prospect.
- Methodology - apply gates (like Miller Heiman).
- Withhold resources unless process/customer validation is done by the gate.
Best Approach to Optimizing CAC Payback
Establish Different Teams/Sales Processes for Each
Also, establishing different teams or sales processes for each prospect's ACV will help optimize the sales process. This will ensure that the company focuses its resources and energy on prospects with a higher potential for closing. This approach will also ensure that the company does not waste resources on prospects that have a lower chance of closing.
Divide Prospects by Segment and Optimize Language, Content, and Workflows
Dividing prospects by segment and optimizing language, content, and workflows will help companies customize their approach for each prospect. This will ensure that the company's outreach is relevant and resonates with the prospect. By optimizing the language, content, and workflows, firms can increase the probability of closing deals.
When segmenting prospects by vertical, Dziersk recommends that businesses consider the following factors:
- Scripts: Tailor your messaging to each prospect's specific needs and pain points.
- Use cases: Demonstrate how your product or service can solve specific problems for each prospect.
- Case studies: Use case studies from customers in the same industry and vertical to demonstrate the effectiveness of your solution.
- ROI specific to the market: Highlight the potential ROI for each prospect based on their specific industry and vertical.
- Vertical language: Use industry-specific language to demonstrate your understanding of their business and build trust with prospects.
Optimize for Velocity in Small and Medium
Small and medium prospects require a different approach when it comes to optimizing the sales process. These prospects require that the sales process be optimized for speed, so the sales team focuses on closing deals as quickly as possible.
Focus on Deal Expansion
Focusing on deal expansion will also help companies increase the ACV of their existing customers. This means that the sales team should drive their efforts to cross-sell and upsell their products or services to existing customers. By focusing on deal expansion, the company can increase the lifetime value of its customers.
Key Bottleneck is Collecting Good Data and Tracking It
Collecting good data and tracking it is essential to optimizing the sales process. Companies need to define stages, people, and processes to understand success.
They also need to weed out dead prospects and identify what is a sales opportunity and what is a closed lost. Defining the buyer and the customer journey is also important. Once the company has a qualified sales opportunity, it must know the next step and the customer deliverables. They also need to remove friction, as anything that delays the process affects the deal. Companies must always be tracking data, conversion rates, and the duration of each stage.
By tracking data, conversion rates, and the duration of each stage, businesses can identify bottlenecks and areas for improvement. By removing friction from the sales process and optimizing workflows, businesses can reduce CAC, reduce the sales cycle, increase the average price, and improve AE productivity.
Optimizing CAC payback is a crucial aspect of the success of any sales department. However, as Thomas Dziersk points out, a one-size-fits-all approach is not always the best way to achieve this. Instead, organizations must segment their prospects based on size and establish different teams and sales processes for each segment.
Hyper-targeting is the key to success, and organizations must carefully pick their go-to-market vertical segments to own them. Sales and marketing processes for each deal must be organized by deal size, with large companies receiving intense focus, medium businesses optimizing their processes, and smaller companies being more transactional.
Segmenting ICP by vertical is also crucial, as each vertical differs in scripts, use cases, case studies, ROI, vertical language, app integrations, touchpoint relationships, and decision-makers. The sale motions also differ by deal size, with enterprise deals requiring the most resources, a focus on scale-up, climbing the leadership hierarchy, mutually agreed action plans, and an early introduction of the plan to prospects.
By following these strategies, organizations can grow deal opportunities and increase their revenue. So, don't settle for a one-size-fits-all approach. Segment your prospects, optimize your sales processes, and hyper-target your ICP to achieve optimal CAC payback.