As opposed to acquisition marketing’s focus on advancing awareness to drive one-off sales, a good customer retention strategy is rooted in building loyalty and lasting, long-term engagement with your customer base.
Why is that something you’d want to do? Well, marketing to existing customers is cheaper and easier than recruiting new customers. You already knew that, right? What’s important to appreciate is how much of a difference that can make to a business’s bottom line and to its overall success. Emphasizing customer retention within your company will allow you to not only grow faster and increase lean revenue, it’s proven to drive cost reduction for new leads through referrals, which should mean more (and more effortless) sales.
Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. (Harvard Business Review)
Marketers are conditioned to be hyper focused on growth. But, underestimating the importance of customer retention leaves money on the table. Even a small increase in customer retention can offer a big boost in profits. Loyal customers are likely to buy more often from you and spend more money with each purchase.
A 5% increase in customer retention rates increases profits by 25 to 95 percent. (Bain & Company study)
In other words, taking care of your existing customers is not only cheaper than spending your time acquiring new ones; it’s proven to ultimately make you more money. Benefits include increased word-of-mouth, repeat business, and a willingness on the customer’s part to provide valuable feedback to the company.
A 10% increase in customer retention levels result in a 30% increase in the value of the company (Bain & Company study)
What’s tried and true: The most pain-free way to grow your customers is not to lose them. Then why has nurturing customer relationships traditionally lost the battle with acquisition efforts? Why do marketers disproportionately allot time, energy and budget to acquiring expensive new customers – even when they know that costs will be higher and ROI lower?
It could be because maintaining customer relationships, while a proven win, is the long game not every company has the stuff to play.
Plus, acquisition is just sexier than retention. The tactics are fun, the results are easily measurable, and the impact is usually immediate.
It’s no wonder then that advertising and marketing are perennially focused on top of the funnel and why building and executing successful campaigns – the ones that attract, entertain, and convert—crowds out other efforts.
If online retailers retained 10% of their existing customers, they would double their revenue. (Forbes)
Out here in the digital space, there’s always been an almost obsessive focus on speed. That’s changing. Customers have the option to defect at the click of a mouse and the cost of constantly restocking the pipeline and refilling the funnel can be pretty steep. If you are focused on profit, the acquisition-only model doesn’t work. Which is why customer retention is fast becoming the new lead generation.
58% of consumers are willing to spend more with companies that provide excellent customer service. (American Express)
When you’ve done a good job taking care of your customers in the past, they are more willing to come back and give an addition to your product line a try.
If you drive a new sale with your well-received campaign, but lose one because you weren’t paying enough attention to building that relationship, you end up with the same number of customers—but lower margins–because of the cost difference between converting new vs keeping existing customers.
26% of consumers mention the terms “trust” and “consistency” as an important element of brand loyalty (Marketing Week)
As demonstrated by the fact that customer retention usually has a much smaller budget provision than acquisition, most businesses tend to overlook the fact that once a customer makes a purchase, there is much more to be done to gain and maintain trust. That trust will be the glue keeps them loyal, influencing their decision to spend with you again.
Loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering. (Temkin Group)
An excited, activated buyer is the most potent marketing asset your organization can leverage. Smart marketers realize this and develop ways to collaborate, enable and nurture connections with their regular patrons and use those ties as a powerful lead generation channel.
The best customer success teams aren’t waiting for problems to solve, they are out interacting with customers through a variety of means. For example, many practice Social Listening, which is a useful technique aimed at finding out what customers genuinely want and then promoting immediate solutions.
On average, loyal customers are worth up to 10 times as much as their first purchase. (White House Office of Consumer Affairs)
Selling to a present customer is quite bit different from approaching a new prospect. You don’t need to begin from the beginning. The consumer knows your name, your level of services and the quality of your products, they’re already convinced.
73% of consumers say friendly customer service representatives can make them fall in love with a brand. (RightNow)
Marketing to current customers should be done with low-pressure conversations. You’ve already successfully convinced them to trust you. Now, you just need to advance the dialogue. Think about it:
- They’ve already bought from you, so presumably you know their preferences
- You should already have access to their direct line (email or phone number) No need for the aggressive lead generation tactics you’d use on a prospect.
- Plus, you can customize your offer based on buyer data. Personalized marketing drives buyer readiness and sales.
If you already have the ear of your customer, they’ll be more open to what else you have to offer.
23% of customers who had a good customer experience told 10+ people. (Harvard Business Review)
A happy customer is the greatest lead generation tool available. Customers are very excited to share their thoughts on brands they love, serving as vital social proof that can help create trust among new leads. Many consumers find meaning in sharing stories of their favorite products and services.
52% of consumers have purchased more from a company after having a positive customer service experience. (Zendesk)
Conclusion: Neither acquisition nor retention works alone and neither works for every situation. Your experience, knowledge of your product and the skills of your team will help you determine the right mix of acquisition and retention for your business.
If you think of your marketing as a full-court press, would your strategy be zone or man to man? I’d bet the answer is, it depends. If you ignore either completely you won’t win consistently. The same is true in winning market share.
As you make plans for 2018, what part will customer retention play in your strategy?