Stop spending money on retention and start focussing on acquisition
Audience Group’s Tom Evans argues that when it comes to the question of retention vs acquisition, the numbers only point one way: loyalty is no longer marketing’s star player.
In late 2017, a research report that gained some industry media coverage declared that in 2018, 76% of marketers would prioritise customer loyalty over new customer acquisition.
I mean, that may well be true, but it’s not the way to go. Why? There is no brand loyalty. Not anymore.
Quite a simplistic point of view.
Brand loyalty is possible. It’s just engineered differently. It’s easier to switch brands now (information availability), so you’ve got to find ways to make it hard.
E.g Apple with apps/software, Nike with Nike+ app and similar.
If you switch, you lose ancillary benefits the brand gives. Simplest way to view it.
Optus have started to get this right around content / entertainment in this market.
Ah, Mazlov’s Hammer. Or “man with hammer sees only nails”
This one-dimensional piece falls prey to the fallacy of false dilemma.
There are shades of grey here.
A brand may choose to focus more or less on acquisition v retention. Or even winback.
They may want to choose different strategies for different customers. But to suggest that a marketing budget for anything but a startup should solely go in acquisition is daft.
I think that the outcome is oversimplified, and I don’t think any marketer would make a snap-decision to dumb-down retention without data and strategy to support it.
Firstly the cost of retention vs acquisition needs to be clearly understood before a decision can be made on marketing investment. In many industries the cost of retention vs acquisition may not be easily measured, so this may present a challenge!
Secondly, the testing of tactics, timing and channels needs to be conducted to determine the real potential of retention activity. How can we make it compelling and easier to stay with our brand/product?
Have a detailed business case and baseline tracking in place before implementing any radical strategy change like this!
As you mention this is very industry specific advice. In my work experience the cost of retention is usually not that high assuming you’re keeping up service standards and not gouging. The cost of aquision (advertising, lead aquision, sales and compliance) is considerably higher. As a customer I’m pretty easy to please but once I move on I’m not likely to go back and I’m pretty vocal on why I won’t deal with that company again (you know what you did; Telstra, Qantas, CBA).
His argument is naive. I bet he always takes his car to the same shop for repair. Loyalty and trust do matter.
Dr. B if he always takes his car to the same place, why spend any money on retention communications to him? What evidence do you have that spending on marcoms to existing customers equals loyalty?
As mentioned above the product’s utility and experience creates the loyalty, not the marketing communications.
There are businesses with 20% churn, so if they can fix that, surely that becomes their growth engine?
There are so many reasons we need to reduce customer churn:
For customers – Churn usually results from an unsatisfactory experience and it takes time to hunt for an alternative supplier. Yes, barriers are coming down but still, it means customers have had an experience that is less than satisfactory. Not good for brand or reputation.
For businesses – when there is high churn, customers are being poured into a leaky bucket. It makes more sense to plug the holes, fix the main causes of unsatisfactory churn before investing in new customer acquisition. It will help with brand reputation too.
Keep customers happy and keep them. The bottom line will be better off.
This is a pretty reasonably articulated argument. But it’s identical to the one proposed by Byron Sharp in ‘How Brands Grow’ – Chapter 11, ‘Why Loyalty Programs Don’t Work’ – isn’t it?