We have become masters of acquisition marketing. Bringing customers in the door. Top of funnel and all that. You might argue we have also to some extent, become hooked on the acquisition marketing drug. And believe me, I understand that. Our CFOs put us under constant pressure to prove a return on our marketing spend. When you can measure ROAS (return on advertising spend) it becomes all too easy to place almost all our focus and investment there.
What we really struggle at is how to ensure our customers keep coming back to us time and again by focussing on building their lifetime value to the business. Crazy when you think about it. Particularly when you consider the many benefits of customer retention and loyalty. Just a few of which include the following:
Lower costs – It costs up to seven times more to attract a new customer than to keep an existing one.
Room for improvement – Feedback from existing customers can be used to improve your offering and overall performance.
Better conversion rates– Existing customers are repeat customers, and they will likely buy from you again. Your current relationship with them allows you to be familiar with their needs.
Higher profits – Existing customer sales are less price focused. And, since you have established trust with your current customers, it’s much easier to upsell and cross-sell to them.
Less marketing – With current customers, there’s no need to push aggressive marketing at them since they already know you and the nature of your products or services. This will ultimately reduce your cost of marketing.
Existing customers are advocates and drive acquisition – Word of mouth and what other customers say will always be trusted more than your own marketing activity.
However, please don’t think that this is simply an online phenomenon. I buy a lot of stuff online and offline. And across the board, in every consumer-facing sector, too many brands are not great when it comes to follow-up marketing.
We’ve been talking about personalisation for as a long as I can remember. Yet, when was the last time you received truly personalised communications from a brand based on who you are, what you like, what you bought previously, content you might be interested in engaging with and so on?
I bought some items for my wife’s birthday from Saint & Sofia, a lovely brand, and received what I thought was an excellent first email below. Visibility of when I’d receive the order, a nice message from the founder and even a note from the head of customer care and a direct number in case anything went wrong.
Unfortunately, after that, all I’ve had is noise. Push marketing emails daily, sometimes twice daily. No attempt to build a relationship. Now there’s a word that belongs to another buzzword bingo acronym; CRM. Customer relationship management. We’ve also been talking about that for twenty-five years! Anyone been trying to build a relationship with you recently?
Contrast this with Bloom & Wild, who have an excellent set of emails for each stage of the customer journey.
I believe there is a new ROI brands can pursue and measure themselves by. Not return on investment, as that too often drives the wrong decisions that lead to the wrong outcomes for customers. Instead, how about Return on Involvement! Involve customers more, interact with them on a more personal, relevant, and engaging way, and they become more loyal. With frequency increasing and lifetime value growing.
And with existing customers becoming advocates for your brand in the process and becoming part of your acquisition marketing strategy as they attract other like-minded souls to your brand.
According to the Harvard Business Review, a 5% increase in customer retention leads to a 25%-95% increase in profitability. Acquisition marketing is a necessary investment, but retention marketing will always have a bigger and more lasting impact on the performance of a business.
If you are interested in learning more about Customer Lifetime Value, retention and turning your customers into fans you can join my Mini MBA in Customer Centricity in partnership with Oxford Professional Education. Next cohort starts January 2023.