The field of marketing is changing rapidly. Customers can engage with businesses anytime and have higher expectations than ever. Free next-day shipping, 24-hour support and social media have created the need to improve service without necessarily creating additional revenue opportunities. As a business owner, how do you allocate your resources?
Here are two startling statistics when listed together: It costs six to seven times more to acquire a new customer than retain a current one, according to the White House Office of Consumer Affairs. A study conducted by Bain & Co. cited that increasing customer retention rates by 5 percent increases profits by 25 to 95 percent.
So why invest such a large portion of your budget in customer acquisition when customer retention drives profitability?
Sales and marketing audit
Here’s a simple way to audit your current sales and marketing plan to ensure you maximize investment. Evaluate your total investment based on the intent of each message. For each activity, ask if the goal is to:
- Acquire new customers.
- Retain current customers.
- Appreciate your customers for a recent action.
- Convert current customers to a different or additional product or service.
- Re-activate lapsed customers.
- Educate customers on new enhancements or industry information that strengthens your relationship.
Acquisition efforts are being over-valued. Dedicating a fraction of those dollars to appreciation and retention would significantly increase your bottom line.
Making the shift
While the trend is to move online where there is less personal customer engagement, customers need a personal touch to reinforce their importance. Differentiate yourself by shifting dollars from low-performing acquisition expenses to personalized appreciation and retention investments.
Once you have completed your audit, move the lowest-performing 5 percent of your current acquisition expenses to new retention and appreciation activities.
For example:
- Send a handwritten thank-you card to every new customer within 24 hours of their purchase.
- Send a gift to recognize the anniversary of when you started doing business with your top 20 customers.
- Have your CEO personally call and thank the buyer of each new customer you gain this year.
- Send a thank-you gift to customers who provide you with complaints, allowing you to improve your product.
- Provide a bonus for internal employees who receive customer compliments.
The Gartner Group reports that 80 percent of your future revenue will come from 20 percent of your current customers. By investing directly in those relationships, you can ensure you are maximizing the lifetime value of each customer. Often you also receive great anecdotal feedback on how to improve your product/service offering to meet their needs. ●
Sam Falletta is president and CEO of Incept Corp. Sam has developed successful customer acquisition and retention strategies for some of the largest brands in the world, including Microsoft, Ford, Honda and the American Red Cross. Reach him at (330) 994-1322 or [email protected]. More is available at www.inceptresults.com.
Learn more at:
LinkedIn: www.linkedin.com/in/samfalletta
