Is acquiring customers creating wealth?

We’ve come a full circle from the times of the denizens of New Guinea 20,000 years back. We’re back to amassing cattle.

   
Is acquiring customers creating wealth

Even the first known form of the transaction had a profit motive. The first recorded trading or business transaction between humans goes back 20,000 years when in New Guinea, the Obsidian (a volcanic glass known for its use in hunting tools) was exchanged for food, tools, etc. Before the advent of any currency form, the profit in a business was more perceptual and needed to be based. If I needed food and I had tools to exchange, I would find a guy who had food to barter for tools. But would I haggle, look for more food from the tool owner? Would the tool owner try to bargain for more number of tools in exchange for his food? Undoubtedly yes.

Through the ages, man and technology have evolved business transactions into a very complex process. However, these processes had one thing in common with the traders of New Guinea 20,000 years ago. The defining principle of the business remains Profit.

Can that change? Should that change? Not unless you’re in the Social Enterprise space where profitability takes a back seat to employment generation and other social needs. But even in this space, an enterprise is expected to generate reasonable profits. Anything else would be charity. So, one has to now take a deep dive into new age ‘customer acquisition models’ and the lack of the profitability angle in such models to know where we’re headed.

Here I believe we can draw a parallel between ancient bartering business models and new-age businesses. As one is well aware, livestock was a barometer to measure one’s wealth in the ancient world. The more cattle you had, the wealthier you were. The cattle’s value was derived from the work one could squeeze out of them in the agricultural fields or as a means of pulling a cart. Cut to recent times and the cattle have been replaced by the consumer. The more consumers I have on my business platform, the richer I am! The buying power of the new-age customer is where his or her value is derived from. But there’s a difference between cattle and men/women. We have the unfortunate or the fortunate ability to choose and free competitive markets goad us to exercise this freedom. Unlike the cattle who when traded by the owner go about doing their ploughing work in someone else’s fields, the human will refuse to be herded around at the behest of their owners. The question, therefore, is what are ‘customer acquisition’ business models all about. Are they all about cattle?

Blasphemous one could say. But it’s worthy of a debate. So here’s the defined ‘new age customer acquisition’ business model scene. I center my business around technology, build a robust platform to accumulate consumers, and service them vis a vis product/service product sales. Target them incessantly through social and digital media, create discounts and incentives regularly to keep them tied in, build my value through the number of customers(cattle!)I have acquired.

But acquiring a customer is like the first date, and all is typically hunky-dory. The customer orders, I give him a discount, he or she is happy. But have I acquired the customer? In other words, the customer acquisition theory works on the premise of love at first sight. It believes that either you walk down the aisle very soon and say ‘ I do’ to each other or that you will find another man or a woman more quickly if this relationship doesn’t work. This is especially true for young, aspiring, and growing markets like India. The teeming millions make a business believe that irrespective of how a relationship goes with an existing customer, there are more to wow every passing minute. Maybe a bit like numerous dating sites. This is where one has to understand the word aggregation truly. Customer aggregation is good; aggregation makes business sense. But it’s the ability of a business to hold onto and build a lasting relationship with the consumer that truly makes it an acquisition. Everything else is a failed blind date.

What is stick-ability? What part of your business ensures that a consumer sticks, come back to you again and again. It’s undoubtedly not technology. It’s not an App or an algorithm. It’s good old-fashioned customer care, customer relationship management which does more than saying that you’re a recently turned vegan with a bias towards cashew cheese. And technology tends to see a customer as an inanimate object, a number that will be satisfied if a strongly built process delivers to them the service they need. But is that true? If so, no one will ever walk into a retail mall to buy shoes or restaurants will have to shut down as customers will be happy only with doorstep deliveries and will have no value for dining out. The issue is not complicated because technology-driven online businesses offer the consumer just one aspect – convenience. It’s ‘armchair retail’ and works on the principle of funnelling more customers to a business partner for exorbitant discount deals. So who pays for your convenience? Surely not you, not the aggregator, it’s the producer.

How is this playing out in the business world? A case in the study here would be the disenchantment of restauranteurs towards food aggregation and delivery services. These businesses are being arm twisted to part with 30% or more for every order placed on them by the aggregating Apps. Unusual one may say, but I believe it’s more unethical and destructive to businesses. It’s like a man from ancient times collecting and aggregating cattle by asking a 30% discount from cattle feed suppliers to feed his stock!

The funny part is that one likes to believe that the aggregators are making huge profits given the kind of discounts they earn from partner businesses. But that is not the case. An unverified source has pointed out that the top 2 food aggregation and delivery services in our country spend between rupees 2.5 to rupees 3 to earn a single rupee! So, bottom line economics are out of the door and it’s the topline or the crusted dressing on top of the cake that now defines value. The restaurant is squeezed and doesn’t make money, the aggregator doesn’t make money, so who does?

We’ve come a full circle from the times of the denizens of New Guinea 20,000 years back. We’re back to amassing cattle.