Shifting From Customer Acquisition to Customer Retention

One important shift to take which is often neglected online is moving from acquiring new customers to retaining your current customers.

Its about basing your businesses revenue off an existing set of loyal customers instead of acquiring new customers.

Our research has shown that repeat sales account for approximately 70% of the average businesses revenue. That means only 30% of your revenue is probably going to come from new customer acquisition over the long term.

However the fallacy that most businesses make is focusing their efforts and advertising dollars on acquiring new customers -- instead of strengthening the relationship with their current customers.

Of course in the beginning when you have no customers you must acquire them.

However it is important to be ready to make the shift to focusing primarily on retention instead of acquisition to strengthen your marketing.

Retention is often less expensive and makes more liberal use of mediums such as customer service, rewards programs, and other low cost retention strategies.

Furthermore selling to your existing customer base is less expensive than acquiring a new customer, so your profits are also higher.

You must purposely create and manage your relationships with your customers.

You can take everything away from a company and it can still succeed as long as you do not take away its customers.

Employees can be replaced, buildings can be rebuilt, but without customers you do not have an enterprise.

Your goal in managing your customer relationships is to increase customer loyalty. Think of it as a scale

Not loyal at all ------------> Intensely loyal

What you want to do is move your customers as far as you can from the left end of the spectrum over to the right end.

One of the ways you can do this is through the creation of customer communities.

These are deliberately designed communities of your customers that create a social aspect to your business, and raises the loyalty.

For example if you sold cereal you could create a breakfast club where parents and children could meet up and play games along with sampling the lastest creations from Kellogs.

This is one of many ways you can apply communities to your brand.

What Affects Customer Loyalty?

The more loyal your customers are to your company, the easier it is for you to maintain a profit. What we have found is there are several common factors which strongly relate to customer loyalty:

Commitment - Your client wants to know that you are putting them first. That your not going to lie, cheat, or manipulate them to get their money. The best way to serve your customers is to put their needs ahead of your own (so long as it does not become a cost center).

When you do what is best for your customer instead of only what is best for the company, you gain intense loyalty and ultimately win in the marketplace. We see this right now with Google who is putting its customer experience ahead of its own advertising profits.

Response - Every company is going to run into problems. Eventually in your customer relationship, your company is going to make an error. What matters is how does your company respond and handle this error.

You can turn a negative customer experience into a way of strengthening your brand by demonstrating how effectively your company deals with customer problems and complaints. Demonstrate outstanding service to your customers.

Consistency - You want to be consistent in your product, service and in your brand positioning. If you recall an earlier post where we talked about McDonalds.

When you go to McDonalds you know exactly what the food will taste like, what the service will be like, how much it will cost, etc. McDonalds may not be winning any awards for culinary excellence but they are extremely consistent at delivering what they promise. This is one of the reasons for their dominance in the fast food industry.

Fulfilling Customer Expectations

One of the powerful aspects of relationship marketing and branding is that it sets customer expectations. You know exactly what to expect when you enter into a McDonalds.

You know what the food will taste like, what you can buy, approximately how much it will cost, what the service will be like, etc. It is this consistency which makes McDonalds such a powerful force in the fast food industry.

Your customers have certain sets of expectations based off what your brand stands for, what it communicates and past experiences.

It is important that your company is consistent with your brand message. You need to maintain the same brand promise overtime and deliver upon it to develop a brand.

When delivering a brand promise, it is important that it is one you can actually deliver to your customers. Offering unrealistic or false brand promises weakens your brand and can lose you customers very fast.

If you have to choose, its better to set customer expectations low and impress them with outstanding value than it is to set customer expectations high and disappoint them.