Customer Retention Versus Customer Acquisition


This has been one of my top marketing guilt trips ever: customer retention versus customer acquisition--& I stand--guilty as charged--customer retention all the way.


Image credit: http://tnw.co/NZtNqa

In the barrage of constantly shrinking bottom-line pressures, new customer acquisition costs as well as customer maintenance costs, it would appear obvious that marketers would throw their money on maintaining & retaining current customer accounts. I wish--& more often so. Marketers are constantly forced to find newer niches, newer premium-set of target groups to sell existing product lines, sometimes at grave costs of depriving current customer accounts of the depth and extent of required marketing activities.

Common marketing folklore--now strictly restricted to folklore--& I wish somebody was listening!

Retention is likely to be more profitable than acquisition.
Customer retention can have a positive impact on acquisition.
Customer retention can take time to bear fruit.

As this study published here on cmo.com points out "We showed that in industry after industry, the high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line: Increasing customer retention rates by 5% increases profits by 25% to 95%."

Words of the wise--for the wise--but in the era of fluid eyeballs, unlike lead generation or customer acquisition, retention campaigns take relatively longer before producing results. It is much more involved--and perceivably uncool activity to pursue?--than lead generation activities? Retention campaigns are thought to focus more on loyalty, relationships, and engagement-metrics perceived to be weakly correlated with sales--atleast that is what I have witnessed it as being perceived.

Every converted customer is your case study--and every opportunity to increase business with him a testament to your customer relationship management; why let a customer walk away without knowing what else you have to offer? Court your customer, if he chooses to buy, good, else part with the courtesy of a good first date, with hopes of a second! But remember, retention ought to precede acquisition.




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