In business-to-business (B2B) markets, firms acquire other firms to gain access to new customers, new products and services, new technologies, and new capabilities. The four main acquisition levers are customer acquisition, product and service acquisition, technology acquisition, and capability acquisition.
Customer acquisition is the most common reason for B2B acquisitions, as firms look to expand their customer base and enter new markets. Product and service acquisition is often driven by a desire to add new capabilities and extend the firm's product offering. Technology acquisition is motivated by a need to acquire new and innovative technologies, while capability acquisition is driven by a desire to acquire new skills and capabilities.
Increasing the number of potential customers
There are four levers for acquiring customers in business-to-business (B2B) markets. They are market share, customer acquisition costs (CAC), customer lifetime value (LTV), and gross margin.
Market share is the percentage of a market that a company owns. The higher the market share, the more potential customers a company has.
Customer acquisition costs (CAC) refer to the costs incurred in acquiring new customers. The lower the CAC, the more potential customers a company can afford to acquire.
Customer lifetime value (LTV) is the total value a customer brings to a company over the course of their relationship. The higher the LTV, the more valuable a customer is to a company.
Gross margin is the difference between a company’s revenue and its costs. The higher the gross margin, the more profit a company makes.
Increasing any of these levers will increase the number of potential customers a company has. For example, if a company lowers its CAC, it can afford to acquire more customers. Or, if a company increases its LTV, it can keep its customers for longer and increase its potential customer base.
The best way to increase the number of potential customers is to focus on increasing market share. The more market share a company has, the more potential customers it has. The best way to increase market share is to offer a better product or service than the competition. If a company can offer a better product or service at a lower price, it will be able to increase its market share and potential customer base.
Increasing the average order value
In business-to-business (B2B) markets, the average order value (AOV) is the average amount spent per transaction. AOV is a key metric for businesses because it represents how much revenue a company can generate from each sale. Increasing the AOV can have a significant impact on a company's bottom line.
There are a number of ways to increase the AOV, but the most effective approach depends on the specific business and market. In general, businesses can increase the AOV by offering a wider range of products and services, increasing the prices of individual items, or bundling items together.
Offering a wider range of products and services gives customers more options to choose from and can make it more likely that they'll find something that meets their needs. Increasing prices can also be an effective strategy, but it's important to make sure that the prices are still competitive. Bundling items together is another way to increase the AOV, as it allows businesses to sell multiple items for a single price.
The most effective approach to increasing the AOV will vary depending on the business and market, but all of these strategies can be effective in the right circumstances. By increasing the AOV, businesses can generate more revenue from each sale, which can have a significant impact on their bottom line.
Increasing the frequency of orders
In business-to-business (B2B) markets, firms commonly seek to increase their market share through one or more of four basic levers: market penetration, market development, product development, and diversification. Of these, market penetration—increasing the frequency of orders from existing customers—is usually the easiest and least risky to pursue.
In its simplest form, market penetration involves nothing more than selling more of the same product to the same customer base. This can be accomplished through various means, such as offering discounts or increasing sales efforts. Typically, however, market penetration also involves some degree of product development, in the form of new features or variants that make the existing product more attractive to customers.
Market development, meanwhile, seeks to increase sales by tapping into new markets, either geographic markets that have not been served before or customer segments that have not been targeted. This can be a risky proposition, as it requires a significant investment in marketing and market research to identify and assess new opportunities.
Product development, as the name suggests, entails developing new products to serve existing or new markets. This is usually the most risky of the four levers, as it requires a significant investment in research and development with no guarantee of success.
Finally, diversification involves expanding into new businesses that are unrelated to the firm’s existing products or markets. This is often seen as the most risky option, as it requires the firm to enter completely unknown territory.
Which of these four levers is most appropriate for a given firm will depend on a number of factors, including the firm’s financial resources, its appetite for risk, and the availability of opportunities. In general, however, market penetration is usually the safest and most straightforward option for firms looking to increase their market share.
Increasing the number of products or services per order
There are four levers that companies can use to increase the number of products or services per order: 1) Offer a larger variety of products or services; 2) Create a bundle of products or services; 3) Offer a discount for ordering multiple products or services; or 4) Offer a subscription service.
Offering a larger variety of products or services is the most common way to increase the number of products or services per order. This lever can be used to upsell customers on higher-priced items or to cross-sell complementary items. For example, a clothing retailer might offer a variety of shirts, pants, and accessories for sale on its website.
Creating a bundle of products or services is another way to increase the number of products or services per order. This lever is often used to sell related items together at a discounted price. For example, a cable company might offer a bundle of its TV, internet, and phone services.
Offering a discount for ordering multiple products or services is a third way to increase the number of products or services per order. This lever can be used to encourage customers to buy more items or to buy a higher quantity of items. For example, a grocery store might offer a 10% discount for orders of $100 or more.
Finally, some companies offer subscription services as a way to increase the number of products or services per order. This lever allows customers to pay for a product or service on a recurring basis. For example, a music streaming service might offer a monthly subscription that allows customers to listen to an unlimited number of songs.