Catalyst

Why retaining customers is important

Kamini Rupani | Updated on January 10, 2018 Published on September 03, 2017

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By wooing new ones and ignoring old customers, companies are failing to exploit their potential lifetime value





Today’s hyper-competitive business landscape is rapidly organising itself around the customer. More so because the internet and evolving distribution models have profoundly changed the way consumers discover, engage and relate to brands. This is probably why CMOs often ask these questions when reviewing performance marketing KPIs: ‘How many unique visitors does the website bring in on a day-on-day basis? What is the daily average traffic, and by how much has it gone up since we launched the new interface? What are the factors that keep some customers browsing while driving others away?’ And finally: ‘How are our digital ad campaigns on Facebook and Google performing?’

Since a sizeable portion of the marketing budget is dedicated to acquiring new customers and prospects, marketers need to be ready with answers. By and large, marketers spend extensively on fine-tuning their ‘acquisition strategies’, believing that acquiring new customers is the only way to fuel rapid growth. In fact, according to GroupM report, This Year Next Year’ (TYNY) 2017, while ad spends in India are poised to grow at 10 per cent, digital ad spend is projected to go up by 30 per cent. In this regard, Google and Facebook currently form a duopoly as the leading providers for digital ad space – with the search engine giant specialising in search ads and the social media pioneer spearheading the display ad space. CMOs, therefore, continue to invest their faith in the efficacy of these ‘agencies’, while ignoring actual conversions and failing to prioritise maximising the lifetime value (LTV) of existing customers. This situation, where marketers work single-mindedly towards attracting new prospects, while devoting very little effort to derive further value from existing customers, is a modern marketing paradox.

Gartner estimates that around 80 per cent of future revenue comes from just 20 per cent of existing customers, echoing the classic Pareto 80-20 rule. Juxtaposing it with the Harvard Business Review’s claim that it is nearly 25 times more expensive to acquire a new customer than to retain an existing one, the need of the hour for CMOs is to deploy a holistic and balanced marketing strategy. This strategy comes in the form of accretion marketing – the path to profitable and sustainable growth.

Engaging interests

Unlike retention and loyalty marketing, accretion marketing is dedicated to converting prospects into customers, and customers into high-value customers by maximising their lifetime value. This process is facilitated by continually building relationships and nurturing interactions.

Accretion marketing begins at the very moment a prospect chooses to interact with the brand – usually, when a prospect’s digital handle (at least one) such as an email ID, a mobile number, app ID or website cookie is captured. This allows marketers to use enablers such as web messaging and browser notifications to connect with customers, even the anonymous ones — compelling them to engage and share more information that can be leveraged for further personalisation.

But, what about the present consumer base? The very core of accretion marketing involves effective retaining strategies that encourages customers to make more, and higher-value, purchases over time. All this at a fraction of the cost of acquiring new customers, allowing brands to enjoy greater ROI.

Think of it this way. Your existing customers are more familiar with your processes and require less hand-holding and lower maintenance costs. And, as McKinsey points out, your customers don’t stop learning after they’ve made the decision to purchase. They enter a “loyalty loop” where they continue to build expectations and seek out information for their next decision.

Within such a dynamic marketing ecosystem, creating continuous customer delight will be the game-changer for sustainable business success. Accretion marketing not only drives customer engagement and behaviour, it also holds the potential for turning promising customer relationships into your brand’s most powerful marketing tools.

Setting the foundation

As building customer relationships is fundamental to accretion marketing, the focus for most businesses should be on implementing an omni-channel marketing automation solution. By drawing on transactional, behavioural, and profile data, such a solution can be utilised to create a comprehensive, unified view of the customer.

In the age of digital nomads who have the attention span of less than that of a goldfish, with this unified view of the customer, marketers can communicate the right message to the right person at the right time, using the right channel — creating a truly personalised, one-to-one experience at scale. The most efficient utilisation of marketing automation solution accomplishes true data-driven personalisation by leveraging micro-segmentation, descriptive and predictive analytics. Brands can thus optimise conversion rates and maximise the lifetime value of their customers, while delivering superlative, individualised experiences.

Marketers today need to prioritise and execute tasks in a highly efficient and streamlined manner, making critical impact during the conversion and closure stages of the process — the ultimate goal being to generate more revenue.

Today most brands define a ‘golden opportunity’ as a lead which seems likely to convert into a high-paying customer. Ambitious brands pursue that elusive golden ticket with a single-minded focus that tends to deprioritise everything else. The truth, however, is that in the current climate, customers call the shots more than marketers do.

Enabled by a growing number of digital touchpoints, customers are constantly wooed by more brands across more channels that they have ever been before. Therefore, it’s time for CMOs to re-think the balance between acquisition marketing and accretion marketing, and spearhead the charge towards profitable growth. After all, the best brands are those that not just build, but also nurture relationships with their customers. The modern day paradox has now forced marketers to not just think about growth, but sustainability and better RoI from each customer.

The author is Chief Marketing Officer at Netcore Solutions

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Published on September 03, 2017
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