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Customer Acquisition

As with offline merchants, the holy grail of online commerce is to secure and retain customers. Any inability of online businesses to acquire paying customers successfully, and retain them, is at the root of instability and shakeout in the Internet space.

In B2C, the problem is simple: too many merchants for too few customers. Very few are good at brand differentiation. There are too many competitors in a small niche and this exacerbates low customer propensity to purchase, aggressive price reductions, and lack of organized shopping environments, all of which contribute to small revenue streams and low customer retention. Most of the time company revenues (not earnings!) barely equal their customer acquisition costs, guaranteeing that increasing volume would not solve this problem.

Many B2B environments are linked to B2C, and they fare worse. In a sense, the B2B customer acquisition problem is inverse to that of B2C. Whereas in B2C a lack of stickiness is an issue, for B2B, established relationships often make customers too sticky. This leads to corporate reluctance to try newer offerings, even if such offerings have higher value ("Nobody ever got fired for buying IBM," goes the old saying).

It takes much more effort to change established and time-proven corporate practices. Moreover, in many cases the touted advantages of intermediaries and marketplaces failed to impress, let alone secure financial advantages for B2B and other exchange participants.

How to improve customer acquisition with each tactic and strategy are subjects for different books. In this chapter, we look at the overall dynamic of customer acquisition

and show the interrelationship between tactics to help you develop a mechanism on which any method can be analyzed.

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