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Strategy

Customer Acquisition Costs: Is It Possible To Escape GAFA and Privatization of the Web?

Frédéric LASNIER
CEO & Chairman (Founding Partner)

Not long ago, I was talking with one of the most brilliant leaders in French Tech (who is preparing to announce an enormous round of capital raising). When I asked him what allowed him to build a global base of users for his offerings, he told me, off the cuff, that he was able to do so while saying no to the tyranny of paid customer acquisition through Google and Facebook by using many other channels. In his case, this meant relying on good old SEO and, in particular now, alliances, partnerships, and affiliations, a subject I recently wrote about.

In his sector of business, acquiring customers using Adwords on landing pages leads to prohibitive, unprofitable acquisition costs for his paying users, whereas having the support of the sales force from a good partner considerably reduces the risk of dispersion that comes naturally with acquisition.

customer acquisition costs

Customer acquisition: the costs of online advertising are constantly going up.

Now, rather than further disclosing his strategy, which would be very inconsiderate, I have decided to explain our strategy for the Pentalog platform.

Have you ever wondered why SkillValue, which belongs to Pentalog, started offering free tests for developers, a free period for start-ups, and a price around €15 for more established companies?

We did this to lower our acquisition costs (both for recruitment and sales) across the entire Pentalog platform. Let me explain:

  1. An Adword that leads to a landing page brings no guarantee regarding the quality of targeting, and FB doesn’t fare much better. In fact, only about 5% of our clicks led to our most targeted landing pages, focused on IT consulting, marketing, and outsourcing offerings. This was too little, but given the average amount of purchases, it was more than sufficient to keep going. We have now revamped this way of working.

  2. Out of all the visitors to our automated skills testing services, 30% become users. This is true for both companies and developers. On the developer side, we obtain information about people’s skill profiles, which significantly reduces our sourcing time. For companies, we use it to find out their recruiting needs and we can effectively re-target them for freelancers or our recruitment service, or even towards a development outsourcing platform. So, we start by selling a service for between €0 and €15. We then redirect those customers towards an offering between €5,000 and €30,000 and, in the last business model, we go to between €50,000 and €2,000,000. Do you follow me?

  3. It works the same way when customers come to RevSquare for our marketing services or to Pentalabbs: they will be mercilessly re-targeted towards other services by our sales force.

  4. Collectively, our blogs attract around 100,000 regular readers.

  5. We now have several hundreds of thousands of direct contacts acquired according to standard practices in our business sector. These range from developers to decision-makers.

  6. We spend tens of thousands of euros per year on Adwords and Facebook marketing campaigns.

  7. We sign onto partnerships and alliances (with Fintech start-ups and with investment funds that want to see their start-ups accelerate the progress on their roadmaps and scale up for the future).

I don’t want to give away our actual per-person sales figures here, but just know that a Pentalog salesperson brings in three to four times what a consulting or outsourcing firm salesperson generally brings in. When it comes to recruitment, our SkillValue recruiters produce results two to three times greater than our competitors in the IT sector. We have strong sales at RevSquare even though we don’t have a salesperson 100% dedicated to this branch of our business.

In total, all activities and business models combined, we have seven salespeople located in three different countries. With just those seven salespeople, we bring in work for 1,000 people. Every month, we open around 100 SkillValue Assessment accounts, and we on-board around 10 IT/marketing outsourcing and consulting clients.

Similar opportunities exist in all business lines, either through vertical integration or through inter-sector mergers. The way I see it, the future is looking bright for formal and informal marketplaces. However, while the go-to-market cost has gone down in the long term thanks to the Web, it is now trending upward for those companies who have only ever known the digital world. Remaining passive in the face of the offerings from tech giants means giving up and watching your acquisition costs go up and up. It’s simple: when they have more than 50% of the market, they no longer really face any price pressure. The Google and Facebook ad duopoly is sitting comfortably.

For a long time now, simply carrying out ad campaigns with Google and Facebook has not been a very smart strategy.

 

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