Not very long ago all marketing was marketing and all sales were sales. As technology has enabled businesses to efficiently segment their messages in infinite ways, such as prospects, partners, opportunities, and current customers, traditional business development functions have become more granular as well.
While most marketing strategies are still mainly focused on new customer acquisition, many companies are dedicating people, technology platforms, and budgets to marketing to their existing customer base.
This is increasingly known as retention marketing. Some call it lifecycle marketing. Others prefer the term loyalty marketing. Regardless of what name it goes by, retention marketing boils down to two key goals:
- Keeping your customers happy
- Encouraging future spending
We've all seen the numbers and statistics that point to the importance of customer retention. There's the widely distributed study from Bain & Company that revealed improving customer retention by just five percent could yield anywhere between a 25 and 95 percent increase in profits. There's the well-known business belief that it's cheaper to retain than acquire, a truth that 82 percent of companies agreed on according to this report from the end of 2014.
Yet, despite these popular facts and figures, retention marketing's rise to acclaim has been slow and met with plenty of skepticism. In 2012, when asked about their biggest concerns, marketers ranked engaging customers and building customer loyalty last on their list, well behind the more popular goal of driving sales.
So, what exactly is retention marketing? Is it really that important? And, if so, how can you do it well?
Defining and Understanding Retention Marketing
Just like acquisition marketing, retention marketing requires companies to understand customers' needs, and then determine what the most relevant and effective messaging would be to fulfill those needs. At the most basic level, the only noticeable difference between acquisition and retention marketing is whether or not the people you are marketing to have purchased from you before.
However, successful retention marketing relies significantly more on a company's ability to build brand loyalty. Companies with high retention numbers tend to have customers that are engaged, supportive and interested. Their customers aren't just happy with their purchase; they intend to keep purchasing.
Unfortunately, this level of brand loyalty isn't created overnight. Instead, it requires concrete planning, careful strategy, and consistent execution. Keeping your customers happy isn't as simple as running the occasional sale or emailing them a coupon every now and then. True customer engagement and satisfaction goes much deeper than a strong price point.
Think of it this way: today's customers live in the age of choice. The Internet allows them to easily research dozens of solutions for every problem they have. Moreover, even if your customers aren't researching alternative solutions, they're still likely being bombarded with marketing content and messaging from your competitors, who are claiming they have a better/newer/less expensive solution.
All of this means that in order for your customers to not only initially choose your product or service, but also choose you again and again, and again - they need to feel valued. Considering that 80 percent of your future sales are projected to come from just 20 percent of your existing customers (another one of those popular retention stats we know you've heard before), crafting an effective retention strategy is more crucial than ever for marketers.
Here's the good news: there are numerous digital tools available that make connecting with your customers and analyzing your retention strategies easier and more effective than ever.
3 Tips for Effective Retention Marketing
If embracing retention marketing is one of your company's big goals for 2016, you're in luck: we have three tips to help you get the most out of your customer relationships.
Setting Your Goals and How You Will Measure Success
Before creating any new strategy, it's important to identify what you hope to accomplish and how you'll measure your progress. You likely already have several metrics in place to measure customer acquisition, now it's time to consider how you'll measure the value of your customers beyond their initial purchase.
Rather than focusing on your cost of customer acquisition in comparison to how much your customer spends on their first purchase, calculate your customer's lifetime value. This metric can allow your company to better predict future revenue as you make customer retention a more significant part of your marketing strategy.
Learn As Much About Your Current Customers As You Can
Customers like doing business with companies that understand their needs before they even have to vocalize them. Use every interaction you have with your customers as a new way to collect customer data. This data can be aggregated across email interactions, social networks, and online customer communities to create detailed customer personas. Doing so can help you both market better to your current customer base and gain a more accurate understanding of qualities to look for in potential future customers.
Identify At-Risk Customers Before It's Too Late
Often, by the time a customer has decided to take their business elsewhere, it's too late for your company to have any influence over their decision. However, when you structure your retention marketing strategy to identify at-risk customers, you can reach out to solve their problem before you lose their business. The trick is determining the most effective method for identifying
One of the most popular methods for tracking customer engagement and interest is within an online customer community platform. By monitoring your customers' behavior within your community, you can learn which relationships are strong and which could benefit from further outreach.
Retention Marketing Takeaway
Though retention marketing has been slower to pick up steam than other marketing strategies, it could be the most important change you make this year.
Remember, numbers don't lie. Nurturing your existing customer relationships and creating brand loyalty is one of the most secure ways to build a company with sustainable growth. Luckily, the same strategies you've used successfully to acquire new customers can be applied to your customer retention strategies. Know your customer, attempt to speak directly to their problems or concerns, and look to the data to track your progress.