Strategies Eli Lilly can use to reduce its customer acquisition cost

Strategies Eli Lilly can use to reduce its customer acquisition cost by at least 10% over the next 12 months

Eli Lilly and Company is an American pharmaceutical company that has been in existence for nearly one and a half centuries since its establishment in 1876. Its market outreach is in about 125 countries. It was the curative product of Col. Eli Lilly; a veteran of the American Civil War and pharmaceutical chemist.

The foundation of Eli Lilly and Company

Col. Eli Lilly opened the doors of Eli Lilly as a chemist and laboratory where he manufactured medicinal drugs.The company has also changed the face of the treatment of diabetes with scientists coming up with the production of insulin using genetic DNA including:

Humulin (insulin) medication
Humalog (insulin lispro)
Basaglar (biosimilar insulin product – insulin glargine)

In addition to producing major medicinal drugs, such as the remarkable mass production of the polio vaccine, Eli Lilly has also dabbled in producing major psychiatric medication such as:

Prozac
Dolophine
Cymbalta
Zyprexa

The growth of Eli Lilly

Since its conception, there was always the need for technological advancements to keep up with the supply of medicine to meet the demand that was coming across. Some of the steps taken to achieve forward development by the company and contributed to its success were:

Automation of its capsule production
Scientific management concepts
Growth in the sales force
International supply of products
Organized research department
Straight line production; enhanced production efficiency and reduced production costs.

Eli Lilly’s relationship with customer acquisition cost

Firstly, customer acquisition cost (CAC) refers to the amount of money that goes into acquiring a new client and includes the marketing budgets, remuneration that goes to the sales team and any outreach work being done to ensure acquisition.

One of the main reasons Eli Lilly was attractive was the success of insulin. This attracted scientists and researchers from various fields and institutions. Acquisition of these parties meant parting with a significant amount of money that was to go into salaries and research. Every project requires an individual budget to make sure that goals are met.

Customer acquisition cost essentially determine the growth or retardation of a company. Whenever a company aims to project trends of growth, funds can be limited. In the process of acquisition, there is a probability of losing a lot of money if certain parameters are not considered, for example the loan-to-value ratio and the repayment period. As a necessary investment, CAC must be properly calculated first to learn how to manage and reduce it.

How customer acquisition cost can be lowered

Total cost of sales and marketing

Number of new customers

However, with new technology, you can alternatively calculate CAC more accurately using programs designed for that specific function. CAC should be lowered for a company to continue enjoying revenue. By doing so, you improve CAC efficiency, getting the most out of the money spent. That being said, Eli Lilly could do the following to reduce customer acquisition cost:

Identifying the ideal customer

At the point of trying to market a particular product, companies strive to appeal to their target audience. For example, for Eli Lilly, their psychiatric medication is supposed to reach patients with mental illnesses. Their target customers are therefore psychiatric institutions and mental health hospitals. After the target customer has been identified, the next step is market segmentation.

Market segmentation means identifying the ideal customer who should be able to deliver the highest LTV to CAC ratio and the shortest payback period. Marketing efforts go into making themselves an ideal partner to work with. Their ideal customer could also be the ‘buyer persona’ and all determinations go into shaping this customer.

After market segmentation, retargeting can be done to maintain the interest of their potential clients. Implement testing goes into seeing what kind of products the clients would like to see on the shelves through:

Emails
Landing pages
Website Copy
Calls to Action (CTAs)

Investing in Customer Retention

Acquiring new clients is more expensive than retaining the existing ones. Customer retention is a strategy that has been put into play by a number of industries, ranging from the fashion industry to the automobile industry.

For example, a customer who has been Toyota cars due to their functionality and simplicity would go on doing so because Toyota is aware of what its customers prefer. Similarly, a fashion boutique would hold frequent sales to ensure their customers stay enticed and keep coming back for more to “shop till they drop”.

In the same sense, Eli Lilly could retain its clients, who are scientists and research institutes, by offering state-of-the-art research facilities and track their progress. Doing so gives the present clients motivation to achieve goals and go beyond expectations. This means revolutionary practices and medicine in the field.

For instance, the cure for cancer has been sought after since the day it was diagnosed. Giving scientists the space to experiment and have an experience like no other can allow them to tap into new knowledge and possibly finding this cure. Wouldn’t that be a dream come true?

With such opportunities, these existing clients will surely share news with other scientists, driving new business and partnerships to Eli Lilly.

Marketing efforts into automation

As mentioned earlier, Eli Lilly has stayed on top of things by constantly undergoing technological changes that have attributed to its growth over the last 100 years.

Now, study has shown that people put more effort into thinking about solutions to problems and not putting them into practice rather than actually getting to the solution. In the same way, more effort could be into actually doing acquisition. The unit put in charge of managing clients, along with the marketing should take it upon themselves to put extra effort in marketing to attract new clients.

The Pareto principle could be put into practice. It theorizes that 20% of your effort could produce 80%. In addition to that, Eli Lilly could choose to increase automisation for processing data and completing tasks, which could work brilliantly for it since it is a production company. Alternatively, it could also find a way to process less data and less tasks, which goes hand-in-hand with market segmentation.

All methods are promising in terms of increasing revenue and therefore reduce CAC.

Getting behind a Formal Referral Program

Let’s say that there are two people suffering from migraines. Say they’re prescribed the same kind of medication but it does not work for both of them; it only works for one of them. The second party may interact with a third person who recommends a drug that worked for them. This second person then goes back to the chemist and asks about the recommended drug. Interestingly, this drug works for them.

Now, this second person got to know about the new drug through word-of-mouth. That is what a referral program is in theory. Eli Lilly and Co. could choose to liaise with current clients for them to communicate how good their services are, in terms of the facilities they offer and the projects that they are working on.

By doing so, there are reduced costs going into marketing but new business is streaming through. For example, a pharmacist could get the word out that there is a new drug being developed to treat the common cold and this would attract other pharmacists who are up for the challenge. It has been cited that “Network is your net worth” and this is exactly what a referral program would do.

Responsiveness

There are many cases where customers are shown dismissive behaviour whenever they walk into a chemist. The person behind the counter doesn’t seem concerned or interested in what the customer has to say, and this obviously rubs the customer the wrong way and this how businesses, not just chemists, lose customers. The relationship between clients and business owners should always be cordial and polite. This translates to how responsive the business owner is with their clients.

For Eli Lilly, responsiveness could be shown in how their tech support team interacts with people online. Having an online presence is important and is enhanced when the people in that field are warm and eager to answer the questions they come across. For example, generation Z and the millennials spend a lot of their time online and communicate this way as well.

With the growing population being gen Z and millennials, it is paramount that the company teaches its support team to respond with genuine niceness. The same goes for the relationship between the distribution team and clients. Through responsiveness, the company also learns what is in demand and what could be done to enhance the effectiveness of certain drugs.

The company could also learn the rate at which pharmaceutical drugs are being abused and find ways to curb that, subconsciously assisting in the war against drugs.

Shift in the sales process

Having a big sales workforce means that there are more people to be paid. Outsourcing labour and sales resources also increases CAC. In industries where there are large workforces, revenue that is realized goes majorly into paying these parties. This means that very little capital is being put back in the industry, and the profit margin is heavily suffering.

Research hereby shows that more individual and manual inputs means higher costs. Eli Lilly could do take the following measures to change the sales process, thereby reducing costs:

Downgrading – this could be interpreted differently by various industries. In the case of Eli Lilly, the sales workforce played a vital role in attributing to its success. With changes in technology, such as programs that automatically carry out sales, the workforce can be slashed by a margin to reduce the amount of money going into salaries. It may put people out of work, but it’s for the growth of the company.
Automation – shifting to more automated practices has proved to be a standard procedure to reduce costs. However, it must start by improving existing automation practices to enhance acquisition then altering manual practices to automated ones.
Dissolve asymmetries – when the amount of money available is not more than or at least equal to the CAC, the company could be in a lot of trouble in terms of going under because of debt. That is why it is important to properly calculate the CAC. The acquisition model and the revenue potential should be directly proportional to each other, i.e. the Actual Cash Value (ACV) and the CAC.

Conclusion: promising future for Eli Lilly

Cutting down on costs is never easy, not just for businesses, but even for individuals. Learning to budget as an individual makes it easier to learn how to manage money. Reducing CAC for Eli Lilly could be looked at in the same way. For instance, the idea of downsizing might seem cruel for the workforce but in the long-term could serve a great purpose for the company.

Practices like having a referral program and responsiveness means definitively good relations between the company and its clients at all times for business to flourish and grow steadily. These reforms could mean impressive growth for the company in the next year.

As a primary industry, Eli Lilly must stay on its toes with the management of different units of the company. A strong head means a healthy body where responsibility and innovation trickles from the management to the subordinates. Proper management is also important for proper management of funds.

Eli Lilly tasted success during difficult times in the US such the World Wars and the Great Depression. Current economic and political changes are yet another obstacle the company is facing and will conquer, and that starts by cutting down on their customer acquisition cost.