What’s the RoI of your customer retention programme?

"It takes months to find a customer..."

Business growth generally boils down to two things:

  1. How many new customers you can acquire (customer acquisition); and
  2. 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:

  1. Be in touch more often not to sell but just to be helpful
  2. Offer the same deals that you offer to new customers to existing customers
  3. Offer better service

Would you consider any others to be essential? And, what’s the RoI of your customer retention efforts?

Comments

  1. Jimena tascon says:

    Good advice thank you Adrian!

  2. It sounds like common sense, right? Keep the customers you have happy if you want to grow your business. But I think so many companies are so focused on grow that they forget to pay attention to the customers they already have. Those people have the power of a repeat purchase, plus they can become brand ambassadors for your company. Why wouldn’t you work to keep them?

    • Hi Joe,
      Thanks for dropping by and adding your take. You would think that it would be obvious. Sometimes, I wonder if it’s because retention and service are not generally taught or covered when business is taught.

      Adrian

  3. For far to many large organisations retention teams swoop into action when it is too late, when the horse has already bolted, trying to buy the customer back

    I like your three points, they are proactive

    Heaven forbid, what would the competition think?

    • Hi James,
      Thank you. Just think what tremors in the market a business could make if it started out with retention in mind?

      Adrian

  4. Hello Adrian
    How about being like Amazon? Everything works so well that you do not need to put in place more frequent communications, nor a loyalty programme nor higher service nor same deal as existing customers.

    How about being like Apple? The product or service itself is so damn compelling that there is no competition. And just about everyone who can afford and Apple product buys one.

    How about being like Zappos? Building the whole company, almost the whole brand on awesome human service.

    Most of the tactics you suggest are used by companies to hide a poor value proposition and a poor customer experience. These tactics strike me as power dressing – artificial clothes to make one look more powerful etc.

    Maz

    • Hi Maz,
      Thanks for your comment. I, like you (I suspect), wish that all companies were like Amazon, Apple and Zappos and that the need for a focus on retention is not needed as what they do is so compelling and valuable to those that use their services and products. However, that is not the case and they are the exception rather than the rule. My hope is that they shine like leadership beacons to others but also that highlighting the value of retention programmes that we can encourage the rest, as it were, to increase their focus on their retention as an incremental way of getting better and becoming more like the heroes that you have highlighted.

      Thanks again for adding your perspective you always bring a fresh and challenging perspective to my ideas and the debate that pushes it on and develops it further.

      Adrian

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  3. IIB_Alumni says:

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    via Adrian Swinscoe What’s the RoI of your customer retention programme? http://t.co/XmXeAuk6

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  6. IIB_Alumni says:

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