Customer Acquisition vs. Customer Retention

Advertisements, promotions, sales. These are all about increasing your client pool or customer acquisition. In 2009, it’s reported that companies spent 56% of their marketing budget on customer acquisition activities and only 33% on customer retention activities.

Many companies are guilty of wooing in new customers, while disregarding the ones they already have.  They dangle a carrot of some free item in front of you, make you sign up for a contract and move on to the next lead.

If you’ve ever heard or seen a commercial from Telus, you’ll recall that they always are giving something away to new customers.  Right now it’s a Samsung Galaxy tablet.

Don’t get me wrong. I think marketing and promotions are critical for business growth. I just don’t think that companies should put so much emphasis on customer acquisition while neglecting customer retention.

Take for example, Zappos.com.  They have prided themselves on being a customer service company that sells shoes and other products.  In Fast Company’s “50 Most Innovative Companies” issue, Zappos CEO Tony Hsieh said this:

“In March of 2003, we made a decision to be about customer service. We view any expense that enhances the customer experience as a marketing cost because it generates more repeat customers through word of mouth.”

A Novel Concept

This week was the employee long-service awards where I work.  They recognized employees that have had between 5 and 30 years of service. These employees were treated to a ceremony in their honour with great meal.  Each employee recognized was also given a gift of their choosing.  Those with longer years of service were able to choose more costly gifts.

The concept of recognizing employees for their years of service is common through organizations, both large and small, because it works.  Employees appreciate the recognition and it contributes to employee retention.

What if companies like Telus rewarded customers for their loyalty?  Obviously the logistics of free gifts may make gifts prohibitive.  But what about after 5 continual years, you received 20% of your next month’s bill?

A customer loyalty program will not eliminate customer attrition, but combined with great customer service approach like Zappos, it will great reduce customer attrition.

When developing your marketing plan and budget, make sure to include strategies and dollars to recognize your existing customers.

What effective strategies have you seen used to recognize customers? Please share below.

  • http://blog.marcbinkley.ca Marc Binkley

    Funny that I stumbled across this Mike. I’m writing an article on Customer Lifetime Value and was looking for some supportive research – great ideas here:)