Which process is easier on the marketing budget – securing new customers or keeping existing ones? Those who chose the latter are right on the money. According to the most fervent number crunchers, customer retention is the far cheaper route.
Here’s why: Acquiring new customers costs a business about six or seven times what keeping them costs. The math is simple, clear, and concise. Finding new customers to replace the old is a big, beastly cash drain. Which raises an obvious question: Why do so many brands prioritize the acquisition of and squandering money on new customers? It’s neither efficient nor wise.
Proponents in the ‘find and replace’ camp cite inevitable customer attrition. Some customers simply will leave, they reason — and that’s that. But the relative costs of retention vs. acquisition suggests the importance of finding a way to keep buyers from bolting.
The good news is, there is a way. Like so many other solutions, the path to success begins by identifying the reasons for negative outcomes. Brands must know why customers are leaving — and follow up with aggressive countermeasures.
So just what are the primary reasons for customer abandonment? Many of the statistically deprived will guess that ex-customers have been nabbed by competitors and cajoled into switching loyalties. A good reason, but one that accounts for only 9% of attritions.
Others will forward the very logical explanation – customers bolted because of dissatisfaction with a product or service. Again, a common reason, but one that applies to only about 14% of brand ditchers.
‘OK, it’s product cost,’ venture others. ‘They found a cheaper alternative.’ No, not even that is the most prevalent reason for customer abandonment. Truth be told, the most powerful impetus for customers leaving a brand is – the uncomfortable feeling that a brand simply doesn’t care about them. 68% of all brand ditchers do so for this glaring reason. All of which proves that a little bit of understanding not only is a customer saver, it’s a cash saver.
Cost-conscious brands, therefore, should build bridges of loyalty to their customers. Understand their hearts and minds, then cater to their needs. Whether you employ advanced CRM tools, surveys, or everything in between, you must know who you’re dealing with. And they must know you know. A strategy you can take to the bank.
If you have any questions or comments about customer retention strategies or any other brand-related topic, feel free to send them our way. You can connect with the Young Company team at 949-376-8404 #4033 or bart@youngcompany.com. And be sure to follow us for the latest brand marketing news and tips.