Why Focusing on Customer Retention is a Marketing Imperative
Retention has always played second string to acquisition within marketing – despite the facts that acquiring new customers is far more expensive than retaining existing ones and that the only top segment of customers contributes the vast majority of long-term revenue. But this imbalance is now critical to change for brands to build sustainable revenue growth.
It can cost anywhere between five and seven times more money to acquire a new customer than to retain an existing one. And, a long-term loyal customer has massive long-term business value – with research analysts such as Gartner predicting that 80% of a brand’s future revenue will come from just 20% of the existing customer base.
With ecommerce expected to grow at a 10% CAGR until 2018 in the US and UK and the digitally native generation coming of age, online sales are expected to soar. Brands need to consider just how they will build 1:1 relationships with their consumers when face-to-face transactions are fewer and farther between.
The problem to date for marketers focused on the retention side has been the inability to create the true 1:1 customer relationships required to build deep loyalty and drive meaningful revenue. While acquisition can take a broad brush approach based on the target customer demographic profile, in order to retain a customer a brand needs not only to know each individual, to understand behavior, incentives and drivers but also to create a way of automatically and directly engaging with each customer.
The short-term focus of acquisition and conversion is no longer good enough to win and retain the next generation. A long-term strategy that builds lifetime value and revenue requires far more effective 1:1 engagement with consumers. It is time for brands to consider the growing role of retention within the overall marketing mix, including the use of retention data to inform and optimize acquisition strategies to drive down the cost to acquire and add customers that are more valuable to the brand.
Find out more about how you can better retain customers through behavioral predictions in our guide to predictive marketing.