Ask any marketer and they'll emphasize the value of investing in loyal customers. And a surefire way to help you improve customer loyalty is through retention marketing. But what exactly is it?
What is retention marketing?
In the most simple terms, retention marketing is the practice of marketing to existing customers. Existing customers cover consumers who've made purchases or transactions with your business in the past. The goals of retention marketing may vary per company and business model, but here are the most common ones:
- Encourage repeat purchases
- Increase basket size (e.g., purchases with higher value)
- Increase brand loyalty to prevent consumers from switching to a competitor or alternatives
- Building brand advocacy
Why it's cheaper to keep existing customers than acquiring new ones
While there's certainly merit in expanding your customer base through acquisition marketing, there's no denying that it certainly costs more than keeping your current ones. So instead of solely focusing on attracting new customers, it's also essential to make consistent efforts to reduce customer churn. Not only can it be more cost-effective, but it can also help drive customer advocacy.
The cost of acquiring new customers is continually rising
Today's competitive market and increase in global competition are making it harder for companies to earn new business. And it's also getting more expensive. According to a study from ProfitWell, the cost of marketing to new consumers has increased by more than 60%. If you're a business that's trying to tighten your spending, that's not good news. So one of the most rational strategies would be to find other ways to generate revenues, including taking care of the customers that you already have.
You already have a captured audience
Marketing to existing customers can prove to be cheaper than acquisition marketing because you already have initial information on your existing customers. You can use the data you have to craft the right retention marketing approach. Armed with the proper information (and customers' subsequent approval to use their data for marketing promotions), companies can gain insights into who their captured audience is. This information includes customer demographics, firmographics, consumer behavior, buying patterns, purchase reviews, and more. When you compare having this on-hand information versus acquiring data points from various sources, you'll appreciate how retention marketing can cost your company fewer resources, both in the form of time and money.
Existing customers are already familiar with your products and services
Existing customers have already tried your product. And if you've done well in the product development and customer onboarding parts of the sales journey, then you can assume they have enjoyed what you offer. This means it's less challenging to convince them to make a repeat purchase or increase their basket size. You can do this through retention marketing activities.
For example, if you're a telecommunications company, why not acknowledge customer milestones through a personalized email marketing effort? If it's been a year since they first signed onto your service, why not send them a thank you email and update them on special perks that in-contract subscribers can enjoy? Or if a customer made a recent purchase from your e-commerce website, why not send them a link where they can leave reviews in exchange for points they can use in your shop? The combinations are virtually limitless. It all depends on how much you know your consumer and how much effort you will invest in making them feel special.
Sound retention marketing efforts can turn loyal customers into advocates for your brand
Strengthening your retention marketing strategy can also help with your customer acquisition goals. Customers are more likely to recommend your product or service based on a positive customer experience. They're not influencers or highly sought-after brand ambassadors, but their referrals can be valuable to a business of any size. Plus, consumers are four times more likely to make a purchase through referrals or recommendations.
You can keep the consumer life cycle going for less
Once referred customers are part of your consumer base, then you can use your retention marketing strategies to keep them happy and retain them. This positive customer experience will then go on to create even more brand advocates for your business. To put it metaphorically, putting effort into retention marketing is hitting two birds (acquisition and customer retention) with one stone. You’re spending on one strategy-customer retention-but also getting the added benefits of gaining new consumers.
The case for prioritizing retention marketing is not purely for economic reasons. It's also essential to take care of current consumers, especially at an age where it's so easy to lose them to competitors, whether direct or indirect. Of course, acquisition marketing is still a crucial part of your overall marketing strategy. But if you want a more holistic, cost-effective, and customer-centric approach, you will need to focus on retention marketing.
Retention marketing is a cost-effective and customer-centric approach to revenue generation and building brand advocacy. By focusing on marketing to existing customers, companies can use their initial information and knowledge of customer behavior to craft personalized marketing campaigns that encourage repeat purchases, increase basket size, and build brand loyalty.
Retention marketing turns loyal customers into advocates for brands, who in turn can refer new customers. While acquisition marketing is still necessary, prioritizing retention marketing can help businesses hit two birds with one stone, retaining existing customers while gaining new ones, making it a more holistic approach to marketing.