Why Your Company Should Focus More on Customer Retention
Part 1 in a 3 part series
New customer acquisition is expensive, costing five times as much as retention. In fact, existing customers are more than half as likely to try new products and spend more in comparison to new customers. Yet, many companies continue to fight the acquisition battle every day. Up to 44 percent of companies are more focused on acquisition and 18 percent put more emphasis on retention strategies.
Why Does Focus on Acquisition Miss the Mark?
Acquisition and retention go hand in hand, it’s true. But focusing too heavily on acquisition may leave existing customers without the appropriate engagement. According to a Harvard Business School report, retention strategies that improve customer retention by 5 percent can improve revenue by 25 to 95 percent. Compared to the high cost of customer acquisition, retaining current customers should be an immediate goal for most companies.
In some cases, where a product or service may be a once-in-a-lifetime purchase, acquisition strategies may make more sense. Others, however, miss out on the full potential of customer retention, because the policies aren’t already in place. Marketers, historically, have been interested in new acquisitions, and company strategies tend to reflect that. Lack of integration across departments in a company may make retention a more difficult goal as well. Retention is more cost-effective according to the data, but requires a company to develop a more personal relationship with consumers, which can be difficult in larger organizations.
Why Balancing Acquisition and Retention is the Future of Sales
As technology grows, it starts to make the world smaller. Whereas a customer used to rely on local marketing and accessibility to inform purchases, now he or she can find online reviews and use companies from around the world. The markets for customer acquisitions, therefore, will become smaller. Companies that focus on retention strategies can look at their sales process as a long-term investment in the organization, not a fast revenue-generating machine.
Not only does customer retention boost profitability, it also helps companies use more organic sales strategies with referrals, build meaningful relationships with the community, and identify and address flaws in company strategies and processes. In time, retention can also boost overall brand perception and encourage customer-driven innovation. Companies that focus on retention strategies will be the ones leading the market into the next generation.
Customer gifting and blended acquisition/retention sales strategies are just a few of the ways companies can start to make changes to meet long-term customer retention goals. Learn more about acquiring long-term customers and retaining them in parts 2 and 3 of this series.
This infographic is chock full of information about acquistion vs. retention, and we’ll continue to expand upon it in parts 2 and 3.