To Retain or to Acquire Customers? You No Longer Have to Choose
In the past, retailers and restaurants put much of their efforts, and investments, into customer acquisition in order to secure their share of the market and increase profits. Nowadays, in our super competitive economy, simply keeping the customers you have and preventing them from straying to the shinier and cheaper new competitor has become the main focus, leaving acquisition tactics to fall by the wayside.
The good news is that retention is more cost effective than acquisition: it costs ten times more to acquire a new customer than to retain an existing one. But here’s the even better news: your most loyal customers are your best acquisition tools! So invest in making your current customers happy and you will not only gain their loyalty and their wallets, but they will refer you new business! Yes, that’s right! Your retention efforts can also double as acquisition initiatives.
Traditional marketing activities often can’t match the power of word-of-mouth recommendations
Several studies have shown the impact of customer experience on future spending behaviour. In one conducted by Medallia, customers who had the best retail experiences could spend 140% more than those with poor experiences – and could remain customers for nearly six times as long. The key was that these experiences didn’t just impact the existing customers; those customers also told their friends and family.
According to Nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising. The Word of Mouth Marketing Association (WOMMA) and the American Marketing Association (AMA) decided to find out exactly what brands were doing about that fact. In a recent study, 64% of marketing executives indicated that they believe word of mouth is the most effective form of marketing.
Retention + WOMM = New Customers
The rise of the internet, social media and mobile technology in the last 7 years have led to dramatic increases in the accessibility of information about companies and the experiences they provide. With this rise poised to continue, the return on investments that improve customer experience and loyalty will likely continue to increase relative to the return on traditional marketing expenditures. The combination of the internet, social media and mobile technology has given consumers a mouth piece that has made it easier than ever before for consumers to them to access information about other customers’ experiences, and to share their own, from anywhere and in real time. According to a recent BrightLocal survey, 88% of consumers read online reviews to determine the quality of local businesses, and that 88% of consumers trust these online reviews just as much as personal recommendations.
Word of mouth marketing (WOMM) is based on these facts. Create experiences worthy of being passed from person-to-person. Keep customers happy and satisfied by providing them with memorable and significant experiences that they will want to share. This will not only secure their loyalty but it will also attract new customers who want a piece of the experience. So should you focus your marketing spend on retaining your existing customers or acquiring new ones? You no longer have to choose.