We have started to work on our 2023 marketing plans with many of our clients this month. As part of these discussions there seems to have been a reoccurring theme around how they engage with their current clients, it got me thinking. Our conversations reminded me that this area of marketing (customer retention) really is the foundation of any business.
In some industries they do this really well, organisations like Costa, Boots and Tesco loyalty programmes spring to mind as examples of where companies do it really well. In marketing we talk a lot about the “know, like, trust model”. This model is where we let our potential audience know who we are, share useful insight, so hopefully they like what we do and then build enough of a rapport with them so they buy from us. This approach can take a lot of work, effort and of course budget.
Before we explore this concept further, let’s start by defining what we mean by customer retention marketing, the Chartered Institute of Marketing (CIM) define customer retention marketing as:
“Marketing activity which continues to meet an existing customer’s needs, usually by ensuring they are satisfied with recent purchases and by innovating products to meet their changing needs.”
Businesses of all sizes are so often completely focussed on acquiring new customers, they forget to take care of their existing ones. The banking industry is a perfect example of this, on Marin Lewis’ Money programme this week he was sharing details of offers from three leading banks to switch your accounts. They were offering up to £200 just for switching plus some other benefits thrown in. Don’t get me wrong, it is definitely important to continue to bring new clients into a business and build a sales pipeline, but it is key to ensure you take care of those who you already work with. Focusing on acquiring new customers all the time can present challenges.
Why is customer retention important?
If a small business has a high number of retained clients, it can be a strong indicator of how successful they are, suggesting that they are good at what they do. Some of the key reasons why this approach is so important are:
Acquisition Costs: It is cited that it costs over five times more to acquire a new customer, vs retaining an existing customer.
Profitability: In an article by Hubspot, they claim that just a 5% increase in customer retention can increase a company’s revenue by a staggering 25-95%!
Loyalty: Long term customers are also more loyal to us as brands, we see them return more often and spend more with us, as they like what we do.
Brand Advocates: If we have happy customers, we see that they often talk about a brand and recommend them to friends and family, this naturally helps us to acquire new customers. We don’t have to work so hard for these clients as they skip the know and like part of the model noted above, based on recommendations.
With all of the above in mind, it feels so obvious to focus on retaining your existing customers, but yet it is a part of marketing mix often overlooked by many small businesses. Challenges do of course present themselves, if you find yourself losing a lot of clients – it might prompt you to explore why that may be. This in itself may be useful, perhaps identifying and highlighting some areas for development within the organisation.
Retention Marketing Activity
So with the above in mind, there seems no doubt that we should be focusing on retaining our existing clients, but how do we do that? As we have talked about before, different marketing media and channels have different roles to play within the marketing mix. Some activity helps us to drive awareness, some helps to drive sales or bookings. Below we share some tools to help us connect with our existing clients:
Plan your customer journey. This is a great place to start. I recently had a client who was running an online shop and she was trying to grow her revenues, by simply offering her clients special offers or extra products at the check out helped her to create a significant uplift in overall revenues. Understanding the customer buying journey will enable us to provide the right message at the right time.
Create a loyalty programme. We talk a lot about understanding who your customer is, by creating a loyalty programme, it can help you to understand more about who they are, their buyer behaviours, making it easier for you to suggest new products or services they might like. Encouraging your loyal customers to recommend you will help to organically acquire new customers. This approach maybe easier to set for some businesses than others, but taking this concept and applying it for your small business can bring great benefits.
Email marketing is a key tool to enable you to engage with your existing audience. As part of the loyalty programme a well thought out email communication platform will not only deliver a message directly to your clients but also enable you to track results efficiently.
Endorsements/ case studies and testimonials are an important part of the buyer journey. They often say that word of mouth is the best form of advertising and this is so true.
Feedback. By understanding how your clients needs change and evolve, will enable you to better flex the proposition offered. By conducting research either through a questionnaire or directly in conversation, feedback is essential to help you retain your client base.
Of course being able to track everything and being clear on your KPIs (key performance indicators) is important, enabling you to understand what works and do less of what does not. If you would like some help in setting up your customer retention marketing activity, please get in touch to arrange your no obligation discovery call.