It is widely accepted that the cost of acquiring a new customer is significantly higher than retaining existing ones. So why are most marketing materials aimed at the new customer? Relationship marketing is a discipline which continues after customer has purchased your product, and attempts to build up a long lasting and profitable bond between your business and the consumer.
Why are new customers expensive to generate?
The process of acquiring a new customer, known in marketing circles simply as ‘acquisition’, can be an expensive method of generating sales. Encouraging someone who is new to your brand to move through the purchase funnel to the point of a sale usually requires a fairly extensive use of marketing resources. For every one customer you do manage to capture, there may be hundreds that you have spent money trying to persuade.
Why is customer retention a good strategy to adopt?
Customer retention is an important strategy to adopt whether you have a new or an established business.
From a financial point of view retention is useful as the cost of acquisition only occurs once at the start of the relationship, the longer the relationship the lower the overall costs. Once you have established a long-term customer, they are…
- Less inclined to switch brands and are less price sensitive
- Likely to spread positive word of mouth and refer their contacts
- Likely to buy other products from the same brand
- Less expensive in terms of customer service, as they are familiar with your processes and require less education
- More susceptible to marketing messages, and more likely to act on them
Satisfaction and retention
Good all-round customer experience at all customer touch points is crucial for a retention strategy. To hang on to your customers, you need to meet or exceed their expectations in a way that is better than the competition in key areas. This means effective management of the marketing mix, and a constant awareness of competitor behaviours. For example, a customer may decide to stick with you rather than use a competitor due to your superior warranty and customer service, even if the product is identical. Do your job well and customers won’t even need to consider defecting to a competitor.
The customer loyalty ladder
As customers move up the ‘loyalty ladder’ they will expect a more personalised service and higher quality interactions which should exceed expectations at every step.
- Prospect – a potential customer who is aware of your brand and has entered the purchase funnel
- Customer – someone who has bought one of your products
- Client – a previous customer who purchases a second time
- Supporter – a customer who may recommend your brand passively, perhaps with alternatives
- Advocate – a customer who actively talks about your brand unprovoked and tries and convince others to purchase or try
Check list for successful relationship marketing
- All elements of your marketing mix are working together towards customer satisfaction…
- Physical evidence
- You have retention marketing materials specifically targeting existing customers
- You look after your customers at every touch point, through all stages of the purchase funnel
Establishing a relationship marketing strategy can help generate sales in a more cost effective manner and can create advocates of your brand who will help do your advertising job for you. Ensuring a long-lasting relationship and exceeding expectations at every step of the journey will strengthen your brand and ensure a sustainable future.