No doubt if you’ve been languishing in the marketing world long enough, you’ll have heard the hoary axiom that it costs more to acquire a new customer than to maintain an existing customer.
A study by Flowtown has shown that piece of marketing lore is absolutely right; new customers cost six to seven times as much to acquire as maintaining existing customers. In a similar study by Bain and Co, the cost of retaining customers was analysed against the cost of sourcing and acquiring new customers. Most notably, the study reveals that ‘increasing customer retention rates by 5% increases profits by 25%-95%’.
In short, it is much more important to maximise the customers you already have for revenue than those you hope to acquire.
Whilst this conclusion may not be particularly novel to those who occupy customer relationship departments up and down the land, it is a way of doing business that many companies seem to ignore. Marketing budgets need to be spent and masterminding campaigns that create great fanfare and demonstrably ‘move the needle’, will always seem much more exciting than keep hold of the people who have already bought from you.
It is for these reasons, perhaps, that marketers don’t always see the benefits in customer retention. The work is too hard, because it means putting in the effort in building a customer relationship and having to waiting sometimes months – even years – before seeing the results. It takes a business that is willing to play the long game for true customer retention to work.
The value in customer retention
But it is worth it. Apart from it being very difficult to find new customers (and make that your business model) it is significantly easier to convert existing customers into profit. According to Market Metrics, it is 60- 70% easier to convert an existing customer than it is to convert a prospect. People will be more likely to buy from a company or individual they have used in the past. Trust as a factor in this decision is particularly important.
It has also been shown that repeat customers can be much better for profit too. Not only are they more likely to buy, studies suggest that they are also likely to spend 33% more than a new prospect would.
Customer retention builds even more long term growth as repeat customers tell others about their positive experience (apparently, the network effect of word-of-mouth means a positive review can reach up to nine other people!). Naturally, this effect has the potential to make for even more business in the future, much of which doesn’t have to be sold to.
There are plenty of strategies to help you boost customer retention. A loyalty programme is one key way in which you can ‘make’ customers buy again and again – coffee shops are particularly good at this! However, when it comes to making customer retention part of your business, it seems good old-fashioned high quality customer service will always make a big difference. If your customers are happy with the service you give them, and you always ensure the core product is of the highest quality, you really cannot fail to keep the people coming back for more.
Using content for customer retention
In the online world, there is no doubt that one of the best ways to acquire and retain customers is through content marketing.
Content marketing is simply creating content that attracts, engages and builds a relationship with an audience which may make a purchase in time. By publishing content that attracts and engages an audience, brands have an opportunity to:
- Build a relationship with customers – by giving them a reason for to return frequently to a brand environment (whether website, social media community or email)
- Have a relevant post-purchase conversation – by delivering stimulating lifestyle content, brand can shift their customer communications from merely service enquiries or fielding complaints, to a relevant
- Instils trust – by giving customers content that they really want and not just salesy content which is opportunistic and irrelevant
- Provides utility – by providing useful content that enables a customer’s lifestyle and interests, brands can provide a service that adds real value to an on-going relation for each customer.
Of course, there is no one-size-fits-all way to do customer retention. A profitable customer relationship can be built in many ways – whether it is by excellent service, excellent products or excellent branding. For those brands that are looking for another way to build a strong customer relationship, there should be no doubt that the next step is excellent content.
To learn more about how idio can help you deliver customer retention programmes with content that is personalized to create unique customer communications, please get in touch.
Thank you for a very well written post. Indeed, relevant and unique content that you are ready to provide to your audience is the first step in establishing a long-term relationship with your potential customers.