It’s that time of year again – time to start planning the marketing budget for 2015, that is. Usually, this is accompanied by a rush of tough questions – are we going to increase our budget next year? How can we maximize revenue based on minimal spend? What mix of digital marketing do we choose in order to acquire enough new customers? Gulp.
Many marketers make the mistake of planning out their budgets solely around acquisition efforts – events, PR, promotions, advertising, and so forth. They fail to look at other important revenue-generating areas like retention, technology, and research and development. Taking this narrow acquisition approach ultimately wastes money and impedes company growth. Applying a more strategic, bigger-picture approach with your budget allows you to spend your dollars more wisely, and in turn generate more revenue.
Here are 3 reasons allocating more of your 2015 budget on Retention Marketing will pay off for your business:
1. You are sitting on an untapped goldmine
It’s been proven time and again that existing customers are more valuable than new ones. According to Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers. While Adobe reports that online retailers spend nearly 80% of their digital marketing budgets acquiring shoppers, for each 1% of shoppers who return for a subsequent visit, overall revenue will increase by approximately 10%. This means if online retailers retained 10% of their existing customers, they would double their revenue. Instead of focusing most of your marketing efforts on acquiring new customers, consider keeping more of the current customers you have.
2. Technology is the way forward
With an overabundance of customer data being generated through transactions and online behavior, the challenge is not accessing the data – it’s making sense of it in order to understand customers. Data-driven technology that analyzes customer data to profile and predict customer behavior allows marketers to gain the more insights into their customers than ever before.
Customer-centric and technology-driven Retention Marketing is here to stay, and the companies who have adapted quickly by investing in this space are currently reaping great financial benefits. For example, The Honest Company wanted to convert their email subscribers into paid customers. Although they had access to a lot of customer data, they didn’t have the technology to turn it into insights and revenue. Retention Science’s platform was able to analyze the collected data, predict their customers’ needs, and send personalized communications to encourage conversions. As a result, The Honest Company saw a 170% increase in conversion rates to paid membership and an 85% lift in average order value.
3. The demand for personalization has begun
With customer choice at an all-time high and attention spans at an all-time low, more and more customers are now spending their money with companies that send relevant communications that cater to their specific needs and wants. In fact, according to Accenture Interactive, 75% of U.S. consumers like it when companies personalize messaging and offers so they are more relevant. A study by the e-tailing group proves this further, reporting that 41% of U.S. consumers buy more from retailers when they receive personalized emails and 39% buy more when retailers suggest products based on past browsing or buying behavior. The most precise way to deliver personalized communications is by using data-driven technology to understand and predict customer behavior.