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 YOU’VE HEARD IT ALL BEFORE.
Acquiring a customer is five times more expensive than keeping an existing customer. It costs more to service a new customer than an old one. Raising customer retention rates by just 5 percent could increase lifetime value by 25 to 100 percent.
Though marketing budgets tend to favor acquisition, few marketers would disagree that retention spending is also necessary. No matter what your objective is — increasing profitability, growing market share, selling more product — you’ll need a strong base of existing customers to build upon. The question is not why to invest in customer retention, but how to do so effectively.
 It’s easy, really
You’re familiar with the phrase, the customer is always right. How about trying a new mantra: the customer is always first.
Begin your marketing plan where you already have the advantage — with current customer relationships that you can cultivate through exceptional service and communication. And as you decide where your retention marketing dollars should be spent, consider these three priorities, each known for their ability to create lasting relationships and strong financial returns:
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Start with a warm welcome
You’ve spent a small fortune to acquire new customers — the last thing you want is for them to say goodbye. Many companies (maybe even yours) often experience negative ROI because they don’t keep new customers long enough to recoup that initial acquisition investment. A strong bonding program can help reverse the trend, establishing profitable behavior and reinforcing the customer’s decision to choose you.
First Marketing, in partnership with an independent research firm, found that something as simple as an informative, well-structured welcome kit reduced customer confusion up front and curtailed problems that might jeopardize customer relationships later.
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 82% read them
63% said they helped them better understand the company’s products and services
47% reported that they refer back to the kit when they have questions or need
information
25% avoided calling customer service by finding information in the kit
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One in five customers also reported that the welcome kit convinced them to try additional products and services. Opportunites to increase profitable behavior begin in the bonding stage and continue throughout the relationship. |
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 Place a priority on customer-specific
promotions
If you reserve the best product offers for acquisition efforts, you may want to reconsider. According to the Journal of Marketing Research (JMR), the average firm has a 60 to 70 percent chance of making a repeat sale to an existing customer, versus a 5 to 20 percent chance of selling to prospects.
Your customer database represents a gold mine of cross-selling and upselling opportunity that can result in deeper customer relationships and a greater lifetime value.
An event-driven campaign (sparked by customer lifecycle milestones, product purchases, etc.) can take any number of forms, from “triggered” letters to e-mail offers to bill inserts, depending on the value of that customer. More profitable customers warrant more attention and more customized campaigns using one-to-one communications. |
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Don’t let “goodbye” be the last word
Sometimes, in spite of your best efforts to retain your customers, the competition woos them away. In fact, companies lose between 10 to 40 percent of their customers each year. Every lost customer can mean lost revenue opportunities and lost referrals — if you give up on them. The JMR reports that the average firm has a 20 to 40 percent probability of successfully selling to lost customers. Isn’t it worth winning them back?
When approaching lost customers, you’ll need to reconnect on a more personal level — acknowledging past mistakes, reestablishing benefits and value, restoring confidence and providing a strong incentive for renewing the relationship.
An effective win back program starts with understanding the reasons why customers left. If they’re unknown, a survey conducted within 90 days following defection can help identify them. With this knowledge, you can determine high-value defectors, segment them by reasons for defection, then pursue them with a targeted campaign. Win back campaigns fare much better than the usual, generating 5 to 8 percent response rates compared to the .5 to 1 percent response of traditional acquisition. |
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Put first things first
Each industry, and each company, has its own marketing challenges to overcome, but progress begins by putting customer retention as the centerpiece of your marketing plan. You’ve already done the hard part and won over the customer. Start developing the relationships you already have and make customer communication a priority. |
5 Tips for Better Customer Retention
 Create a welcome experience.
 Use multiple customer touchpoints.
 Develop relevant, customer-only offers.
 Personalize your communications.
 Win back high-value, lost customers.
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As president of First Marketing, Ron Drenning champions strong retention strategy and consults with Fortune 500 companies to build lasting brand relationships with their customers. Ron can be reached at
rdrenning@first-marketing.com. |
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