Vonage CEO: Customer acquisition cost "not acceptable," mobile phone client coming

Stating the obvious in Vonage's 2008 earnings call, CEO Marc Lefar called the company's expenses to secure new customers "not acceptable," and added that the net addition of customers and cost of customer acquisition "fell well below" expectations. Lefar rattled off a series of improvements Vonage needed to make in bringing on customers and improving problem resolution. He also briefly sketched out new product offerings, including some sort of mobile phone client to leverage WiFi.

For starters, the SLAC - marketing expense per customer brought onboard - has gone up to $309, despite reducing marketing costs by $3 million from the previous quarter. Last quarter, SLAC was reported at $289.

Lefar wants to improve the quality of prospects calling into the company. While Vonage's latest set of commercials have produced a 10 percent improvement in the level of interest compared to prior work, the company is looking for a new ad agency and expects to close a deal at the end of this quarter.

Once customers arrive, the onramp experience to get them beyond sign-up to actually using the service needs to improve; after three weeks, a quarter of the customers who have signed up haven't used the service.

Many customers who leave Vonage for competitive reasons are leaving due to call quality, Lefar said, so improvements are needed there as well.

Customer care is also a big cost center that Vonage needs to optimize. Lefar said the company gets 10 million calls per year into its call centers, but many of those can be "completely eliminated" with IVR and self-service web based tools. A 10 percent reduction in live calls would save the company anywhere from $6 million to $8 million per year.

New products Vonage is looking to include improvements to core services such as outbound caller ID and autoconnection to a 411 service. The company sees new market opportunities outside of the U.S., UK, and Canada to leverage its heavy international usage.

Vonage would also like to "take advantage of" open mobile applications, with download/preloaded apps using WiFi for local connectivity a "good opportunity." VonagePro is going to get fine-tuned, as the company develops an SMB offering to support up to 10 phone lines.