Why customer retention deserves your attention
Why customer retention deserves your attention
In a study by Sitecore and Forbes Insights, the top marketing priority for 58% of respondents was attracting new customers. 40% cited their top priority as turning current customers into customers for life.
What the study didn’t indicate was that those 58% who are focused on attracting new customers are making a mistake.
Here are some compelling facts to support this argument:
- A 5% reduction in the customer defection rate will increase profits by 25-95%. (Bain & Co/HBR)
- A 2% increase in customer retention has the same effect as decreasing costs by 10% (Emmet and Mark Murphy)
- The probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20% (Marketing Metrics)
- It is 6 to 7 times more expensive to acquire new customers than it is to keep a current one (White House Office of Consumer Affairs)
- 80% of your future profits will come from just 20% of your existing customers (Gartner)
- Repeat customers spend 33% more compared to new customers (Laura Lake)
So why does the acquisition vs. retention debate continue?
Despite the research that indicates that a greater focus on customer retention makes good business sense, marketers at most organizations still invest more time, resources and money into acquisition.
First, it’s easy. It’s easier to acquire than retain. Customer retention is a lot of work.
Second, and probably more importantly, growth.
The old adage that “companies are in business to maximize shareholder value” oftentimes drives this thinking. The fastest way to grow and the quickest way to boost short-term revenue, is to win more customers. The ROI of growth is fast and measurable too, which makes it easy for CEOs to report to shareholders that the company is going gangbusters because their customer base grew by X%.
How to choose between an acquisition strategy and a retention strategy
The research and numbers indicate that most businesses would benefit from embracing a retention strategy. But the need for quick wins and shareholder confidence still causes CEOs to ignore the long-term view. The research company Foresters has these suggestions to help make the decision easier.
You’ve chosen a retention strategy: now what?
An organization will only boost their customer retention by focusing on delivering the best customer experience possible.
Remember, in its simplest form, customer experience is the sum of all the interactions that a customer has with a company over the course of the relationship. These interactions include making a purchase, using the product, viewing billing statements, reading correspondence, call support and visiting the company’s website.
Every one of these interactions with your brand will impact a customer’s decision to buy from you or move on to a competitor.
The customer experience must become personalized
Customers want their interactions with your brand to be unified in tone and manner and the experience to be personalized. In other words, implementing a retention strategy is all about shifting your organization’s marketing mindset from a transactional one to a relationship-building one.
Just like any rewarding relationship with someone, the key to a rewarding relationship with a customer is getting to know them.
Today’s customer expects companies to engage with them at the right time with the right messaging. Interactions with your organization must be contextually relevant to the customer’s needs, particular touchpoints or stages in their journey.
To be able to do this, companies must get to know and understand their customers. This is done by developing personas; identifying needs, wants and pain points; and conducting journey mapping.
Leverage new technology to get to know your customers
Earlier I mentioned that one of the reasons why so many organizations drag their feet when it comes to adopting a retention strategy over an acquisition strategy is that customer retention is perceived to be a lot of work. Customer communication management (CCM) systems have changed this.
CCM systems, with journey mapping capabilities, allow marketers to capture and link data sources throughout the customer’s journey. This facilitates a single view of the customer that affords development and delivery of seamless, consistent, multichannel and omnichannel communications that are timely, relevant and personalized for customers wherever they are on the customer lifecycle.
How a retention strategy pays off
By focusing on retention by delivering a great experience customers will feel like the company cares about them. They in turn will care about the company which will translate into long-term loyalty, additional purchases and referring your organization to family, friends and colleagues.
Delve deeper into the acquisition vs. retention discussion.
Download a complimentary copy of the white paper “Acquisition vs. Retention: Where Should Brands Focus?”