We’ve all seen statistics illustrating the value of customer retention. This concept is not new or groundbreaking, but it’s definitely worth revisiting:
Acquiring a new customer is five times as expensive as retaining an existing customer.
The success rate of selling to a new customer is 5-20% whereas the success rate of selling to a customer you already have is 60-70%.
Despite the overwhelming evidence supporting customer retention as a priority, why are so many companies still choosing to leave it as a secondary objective?
44% of companies admit they “have a greater focus” on acquisition, while 18% focus on retention (the rest claim to have an equal focus)
As a business owner, I understand the appeal of standing up at a quarterly meeting and stating that “so far this year we’ve gained XX number of new clients.” It’s an indication of growth, no doubt. On top of that, it just sounds good and feels good to say.
But the fact is, new customer acquisition isn’t always yielding the highest possible ROI or maximizing the efficiency of your efforts. So much time, energy and resources are spent earning new customers it doesn’t make much sense to downgrade their level of importance after purchase.
In fact, sometimes over emphasizing gaining new customers is burning rubber without making much progress; in terms of revenue and/or profit. One important metric we encourage our clients to measure along with new customers and customer satisfaction is brand defection. In other words, how many customers are you losing over a period of time? This provides the necessary context in which customer acquisitions can be accurately assessed.
For example, if you acquire 200 new customers over a 6 month period but you lose 201 customers during that same time period, it’s technically a losing effort. This is not to take away from the customer acquisition successes; rather it’s to maintain your big-picture perspective where the overall company goals are center stage.
Taking a step back, I realize I may be preaching to the choir here. You may already have customer retention as a priority today or heading into next year. So to those of you who are on board with the importance and value of customer retention, my question is this…
what’s your customer retention strategy?
It’s easy to blur the line between measuring success and strategizing for success. This may seem like splitting hairs or mere semantic differences but this is where good companies turn into great companies. By understanding the difference between observational insights and actionable insights, your team will be equipped with resources needed to make factually-based decisions rather than relying on theories or presumptions.
So what does all this have to do with customer retention? I’m glad I asked.
Without a detailed customer retention strategy your company is essentially feeling around in the dark, unable to effectively examine processes to build upon successes and make adjustments when falling short. You grab ahold of a certain customer segment and have strong retention rates, whereas another segment is defecting and jumping to a competitor. Why is this happening? What can you learn from one side and apply to the other? Are these results sustainable or will you be left scrambling to adjust to unforeseen market shifts?
The answers to these types of questions vary from company to company, from industry to industry, and from market to market. By making customer retention strategy a priority within the overall sales and marketing plan your company will not only have the metrics to monitor progress, you’ll also understand how you achieved that progress and have an opportunity to make adjustments as needed. Without a customer retention strategy, you’ll just have numbers and statistical observations offering little insight on how you arrived or the best way to move forward.
At this point you might be thinking, “Ok yes I’m sold on the concept a strategic customer retention plan – so what now?”
A good first step is to review your Customer Journey Map and have a close look at the post-purchase touchpoints you’ve plotted.
We commonly see a fade-out or abrupt end to Customer Journey Maps after the purchase is made, which indicates an imbalance between customer acquisition and retention. Without a plan or strategy as detailed as the beginning of the customer life cycle, it will become obvious to the customer that they are becoming less important as time moves forward; which is a frequently cited reason for brand defection.
We’ve found it beneficial to consider pre-purchase journey mapping as Phase One and approach the customer’s post-purchase journey as Phase Two.
Distinguishing between these two customer journey segments will identify retention as its own unique goal while still keeping it aligned with the brand messaging that attracted customers in the first place.
Clearly articulate where you want customers and then work backwards to identify gaps or roadblocks that might disrupt repurchase intent.
For example, within the current system do return customers have to repeat all the same processes required by new customers? Are they being treated as familiar guests or receiving introductory messages? Simplifying and streamlining repurchase efforts will not only offer logistics benefits, it will also show that your brand is paying attention and appreciate the customer’s decision to return.
Track and measure post-purchase activity and engagement just as you would pre-purchase conversions.
This will enable specific adjustments to be made to improve performance, and it will provide in-depth insights when cross-analyzing the outcomes of Phase One and Phase Two Customer Journey activity.
This is merely scratching the surface of what is possible by making Customer Retention a strategic priority. Whether you’re starting fresh or looking to build upon existing strengths, we want to share our experience in support of you achieving your goals.
Leveraging data-driven insights to create unique and memorable customer experiences has been our specialty for over 30 years. It’s what we love to do, and we’re pretty darn good at it.
So give us a shout and let’s get the conversation started!