The Leaky Bucket

A leaky water bucket

Acquisition Vs Retention: A consumer life-cycle question

What is most important to your business, the acquisition of new business, or the retention of your existing client base? Presumably, your response on this would immediately be BOTH!! But can you put your initial response into facts and figures?  How much of your time, resource and marketing budget goes towards the maintenance of existing business?

Despite the statistics that state acquiring a new customer costs 5 times more than retaining your existing ones, sales and marketing teams (and probably your CEO too!) believe that resources should be spent on just this, in fact 44% of companies* have a greater focus on acquisition over retention – but what is the value of this, and how many of these new clients do you end up retaining.  How many are still with you after a year, and what is the experience like that drives the decision on whether a customer returns, or shifts to a competitor?

The simplest definition of customer service is (1) the sum of all interactions that a customer has over the course of a client relationship and (2) the customer’s emotions and perceptions of your brand during the course of these interactions.  This experience begins from the moment a customer has a need and begins the research into a particular product or service and from this point on wards, everything a brand does in terms of marketing, personalisation, site navigation and brand personality impacts the customer decision to buy from your brand, or from a competitor.

Brands spend a lot of time, effort and money ensuring that first impressions are strong enough to encourage customers to buy, and rightly so, acquiring new customers is important to any business.  However, there is a disproportionate amount of effort placed upon the early stages of the customer life-cycle and the efforts to attract and convert a potential customer.  Once the customer is on board, it’s all over, and brands make little or no effort to keep a customer engaged, failing to deliver a positive experience through post-purchase interactions.  As a result, a customer can become frustrated or apathetic about repeat business, and brands get stuck in the never-ending acquisition/churn cycle.

The harsh truth is, acquisition costs get more expensive as retention numbers decline.  Companies must acquire more customers to fill ‘The Leaky Bucket’.  Without customers to retain, acquisition costs increase exponentially.  Brands can only fix the retention issue by focusing on delivering a valuable customer experience and when that happens, the cost of acquisition will go down as existing customers can help to drive acquisition through word of mouth referral.

So, how do you shift the focus? You need to demand alignment between strategy and life-cycle investment. For example; if the goal is profitability, but retention is low, reduce investment in the buy stages of the life-cycle. If the goal is growth, invest more.

Redraw the company life-cycle to reflect customer realities. Customise the stages to show the impact of each stage on the business and the customer, indicate the weightiness of each stage, help employees understand the change and advocate using the updated life-cycle for prioritising marketing and customer experience investments.

Beyond this, as marketers begin to attract new customers, the focus of their content and messaging should shift tone toward relationship building and away from transactional messaging.  Winning over the hearts and minds of new customers is not so different from developing personal relationships.  Critical to this shift is engaging customers at the right time, with the right message – contextually relevant to the customers’ needs and touch-points in their journeys. Understanding needs and wants and defining the pain points along the journey, talking about how your services can solve their problems and moving away from just acquiring and selling to developing long term relationships.

At MRM, we offer a consultative approach to the marketing needs of your business, and have a proven track record in providing loyalty schemes for both B2B and B2C clients.

If you would like more information on our customer acquisition and retention tools, please call us om 01858 410 510 or email, we look forward to hearing from you.


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