Saurabh Madan, General Manager, Southeast Asia and Australia & New Zealand, MoEngage
Consumer behaviour has never been more volatile. The internet and e-commerce have granted access to a never-ending stream of deals, upgrades and flashier products, thereby upending the concept of lifetime loyalty. Yet while marketers remain fixated on leads and customer acquisition, they are missing out on a key driver of consistent sales and recurring revenue.
In a world populated by billions of smartphones and smart interfaces, consumers are coming into contact with brands and advertising on a minute-by-minute basis. As a result, 30% of consumers are likely to try out a new brand and a quarter claim they will abandon a brand after a negative experience. Marketers chasing quick wins and easy conversions will therefore gravitate toward acquisition over retention. However, the long game of retention marketing will pay the bigger rewards.
Relationships are key
Long-lasting customer relationships are integral to business growth and profitability.
It is up to seven times cheaper to retain customers than to acquire new ones. Moreover, a 5% increase in retention can generate an up to 95% revenue increase.
This is because businesses are more likely to sell to an existing customer as compared to a first-time buyer. Loyal customers who understand and value a product and service are also willing to spend more. They are also more likely to recommend a brand to their peers, which is significantly more likely to generate a converted customer compared to advertising.
Retention marketing’s value cannot be understated. However, it does require marketers to spend time relationship-building while delivering extra value beyond a customer’s first purchase. It also necessitates understanding why a consumer leaves a brand.
Poor customer service, slow response times and problem resolution are key drivers behind customer churn. Sloppy digital marketing strategies are likewise, a major turnoff. Marketing emails lacking personalisation or creativity can accelerate unsubscribe rates from a company’s mailing list. As a result, great customer engagement must underpin a marketing strategy at every stage and touchpoint.
Finding the sweet spot
Naturally, fledgling brands are more likely to prioritise customer acquisition to gain traction and build their consumer base. However, even for start-up businesses, investment in retention strategies to reward the customers who were willing to take the risk to try out a new product or service is crucial.
At the scale-up stage, when a company reaches consistent sales, splitting the marketing efforts into 70% acquisition and 30% retention becomes the sweet spot. Finally, once a brand is well-established and boasts a significant customer base, its focus should change to 60%retention and 40% acquisition. Such a high percentage may seem surprising to some, but this is where brands reap the benefits in the years to come. .
In terms of tactics for retention, marketers have a ready-made toolkit. As consumers increasingly switch between various channels to research products and services, a well-executed omnichannel experience is essential.
To maximise this, marketers must leverage data and purchase history to craft unique personalised experiences tailored to the individual customer. Indeed, advances in artificial Intelligence has enabled marketers to create hyper-personalised communications that are 80% more likely to generate repeat purchases.
Marketers should also sync their hyper-personalisation efforts with advanced segmentation. This enables them to identify high-value groups with the largest likelihood of purchasing a particular kind of product and therefore lead to improved return on investment (ROI).
Finally, although centuries old, nothing seals customer retention like a good old loyalty program. By rewarding customers for their repeat purchases, brands solidify a neural link between the brand and the particular purchase behaviour. Loyalty programs can increase store visitations by up to 60% and encourage repeat customers to spend more.
With competitors poised to swipe customers in a matter of clicks, retention cannot be an afterthought. It must instead, be at the forefront of a marketing strategy. Brands that differentiate themselves through advanced customer engagement strategies will benefit from word-of-mouth exposure, profitability and perhaps even a lifetime of satisfied customers.