I had an interesting conversation over lunch yesterday. We were discussing why new customer initiatives seem to be much more attractive to marketeers than customer retention activities.
Even though all our marketing eduction, and experience, tell us that it is much cheaper to sell to existing customers and patrons yet it seems that more effort is put into customer acquisition. That is not to say that customer acquisition is not important – it is the only way to grow a business over time. But by ignoring or just paying lip service to existing customer retention and development it makes new customer marketing nowhere near as efficient as it should be. If you are not actively marketing to your existing customers then how do you know the most profitable sectors targets to pursue for new customers.
By actively market, I mean continually profile and develop strategies for specific customer groups. Perhaps that is the problem – perhaps we have too much data to even get our heads around. Ideally, we’d market to our customers on a one-to-one basis, although that is not always going to be economic. Also, once we start this sort of analysis the faithful standard socio-economic categories just don’t cut it – that makes new customer marketing much harder. And the problem with tight segmentation in new customer marketing is the worry that you may lose some potential customers not in those groups – challenging.
So why? You will have your on views but a couple of things we discussed were: customer retention programmes are not as glamorous – it is the acquisition which has the advert budget; and retention programmes take a lot of analysis, thought and rigorous testing and refinement – a lot of detail. Perhaps it’s just the math.
Given today’s market place, hanging onto your customers is going to be critical. As budgets get cut, will it be new customer recruitment or customer retention that will feel the pinch first?