09 Aug 3 Types of Effective Retention Marketing Strategies
Retention marketing, sometimes referred to as lifecycle marketing or loyalty marketing, is a new term that essentially boils down to keeping customers engaged, happy, and spending. By delivering relevant and engaging content to your customers, you can increase their customer lifetime value (CLV) and, in turn, overall revenue for your business.
According to Bain and Co., it costs seven times more to attract new customers than it does to retain existing ones. Research also shows that a 5% increase in customer retention can generate up to 125% in profits. Ignoring retention marketing and solely focusing on customer acquisition results in customer churn, which ultimately leads to a loss in revenue and profit margins. As a result, smart businesses are putting a more prominent focus on retention marketing.
Successful retention marketing involves building two-way and engaging relationships with your customers. In the current landscape of big data and predictive analytics, which provide us with in-depth customer insights, the key to engagement is through personalization. In fact, customers now expect and demand personalization. According to Accenture Interactive, 75% of U.S. consumers like it when companies personalize messaging and offers so they are more relevant. The e-tailing group found 41% of U.S. consumers buy more from retailers when they receive personalized emails.
Doing retention marketing and doing it well are two very different things. We’ve pulled together three ways you can incorporate retention marketing into your overall strategy:
1) Redefine how you measure customer value
Customer acquisition is easy to measure. How much they spend in their first purchase vs. how much it cost to acquire them equals your ROI. It’s simple. This is why many marketing campaigns focus on acquiring customers at all costs, think discounts and other tactics that might eat away profits. However, consumers are getting smarter and discounts alone are not enough to drive sales.
Because of the ubiquity of competitive pricing, customers now place more importance on value than just finding the lowest price. Marketers should be doing the same when it comes to their customers. Measuring the customer lifetime value (CLV) of each customer will give you a view of the potential net profit from each person during the amount of time they are engaged with your brand. This is a better way to measure your customers as it focuses on lifetime value instead of the one-off profit from one acquisition. However, because the effectiveness of a customer retention campaigns takes longer to measure than one-off sales, it is often overlooked, even though it is usually a better prediction of future revenue.
2) Make the investment in data-driven technology
Retention marketing — customer retention in general — is all about communicating with your customers on an individual, personal level with messaging and offers that are specific to their needs. With the technology available today, personalization of some type is feasible for organizations of any size. However, in order to personalize your marketing to speak to your customers on an individual level, you’ll need information and data about them. Luckily, eCommerce companies are sitting on mountains of customer data; however, this issue is that it can be hard to analyze and pull from this data actionable insights — this is where data science comes into play.
This used to be something only big companies like Amazon could afford to do because of the high costs associated with data science. Now, however, many organizations are using third-party vendors to help collect and analyze the data on their customers. Companies who are willing to invest in the technology and resources that are able to help them better gather and analyze customer data will not only see results, but will see solid ROI.
3) Reprioritize and restructure priorities
Business priorities are most often ranked based on the profitability of each item. As mentioned, since it is so easy to measure the ROI of acquisition, it is often first priority when it comes to marketing; however, smart marketers know that retention marketing is equally as (if not more) important than acquisition. Not only is retention marketing more effective at improving your bottom line, according to an eConsultancy report, 82% of companies agree that retention is cheaper to execute than acquisition.
While this is all great in theory, marketers and organizations need to realize that retention marketing is a full-time endeavor and should be treated as such. This means getting buy-in from the top-down as it has to be a priority for the business, not just your marketing department. This means you may need to create a position specifically focuses on retention marketing instead of simply adding it as a task for your current email marketer.
Companies that take retention marketing seriously will find that they are rewarded handsomely for their efforts. While it’s not easy to implement into an established marketing strategy, the ability to keep those customers who you have worked so hard to acquire will pay off to those who make the investment.