Business growth generally boils down to two things:
- How many new customers you can acquire (customer acquisition); and
- How long you can keep your existing customers for (customer retention).
The balance of your focus will depend largely on the stage of development of your business but the aim should be to make sure that you are acquiring new customers faster than you are losing them.
Recently, I was reading Taking A Customer From Like To Love: The UX Of Long-Term Relationships and a couple of sentences in the article sums this up really well:
“The rule of retention is that you must be willing to spend as much to keep a customer as you did to acquire them. Leaky buckets don’t fill up quickly.”
Now, if you hadn’t noticed, this week is Social Media Week and I’ve been lucky enough to be involved in one Panel event for the LikeMinds gang and, also, attended another event set up by the crew over at MyNewsDesk. In between times, I’ve been (sort of) following on and off the twitter hashtag #smwldn to see what’s being talked about.
Earlier in the week there was quite a lot of talk about the Return on Investment (RoI) of your social media activity. Now, this post is not going to veer off into a discussion about social media RoI (I’ll leave that for a future post) but it did get me to thinking about RoI and marketing, in general.
I believe that larger companies with in-house marketing departments spend a lot of time and effort talking and thinking about the RoI of their customer acquisition efforts. What some may call ‘traditional marketing’. As for smaller companies, I believe many of them don’t it for a number of reasons: lack of time or knowledge or resources or something. More often than not they are just glad that their marketing works.
However, when it comes to measuring the RoI on your customer retention efforts (I wrote about this before in What’s the RoI of your marketing for customer acquisition AND customer retention?) I wonder how many companies actually have a customer retention programme nevermind actually measuring the RoI of their efforts.
My guess is not many and that puzzles me. Particularly, if you believe the idea that it is 6-8 times more expensive to acquire a new customer than it is to retain an existing one. Is this the RoI of customer retention. I have seen this quote a number of times and do remember reading it in a marketing book years ago but, although I searched high and low, I couldn’t find the reference. Intuitively, however, I believe there is a lot of truth in this statement and an effective customer retention programme is an ingredient of any successful and growth business.
Also, a customer retention programme does not necessarily have to be complicated to succeed. Here’s three elements that I think should be at the heart of any customer retention programme for any business, large or small:
- Be in touch more often not to sell but just to be helpful
- Offer the same deals that you offer to new customers to existing customers
- Offer better service
Would you consider any others to be essential? And, what’s the RoI of your customer retention efforts?