At BrainSell we frequently talk to customers who need a better strategy to manage their leads and contacts in both Marketing Automation and CRM. Unfortunately, too many businesses focus almost exclusively on getting NEW Leads and not selling into existing accounts. This makes sense on one level because businesses NEED new logos to offset the normal attrition rates. This is especially true for businesses that rely on recurring revenue.
But the hunt for new logos shouldn’t overshadow the process for retaining and growing existing customers.
Acquiring a new customer can cost you five times as much as retaining an existing one. And the probability of conversion between the two is enough to give anyone pause: new customers convert at a rate of 5-20%, while existing customers buy at a rate of 60-70%.
These reasons highlight why customer retention should be a major factor in your marketing efforts. You’ll spend less to get more out of people who’ve done business with you before, which naturally leads to the topic of customer lifetime value (CLV) and why it’s an important indicator of success.
The higher the CLV, the better your profitability will be. What’s more, a higher CLV affords you the luxury of making more accurate revenue predictions. You can calculate with greater certainty whether a customer will return if it has a long-standing history with your company. If your CLV is relatively low, it should serve as a reminder that you’re not doing enough to foster any sort of loyalty with past customers.
When you take the time to analyze CLV, it can tell you which customer segments and business areas are most profitable. This allows you to redirect your marketing and sales efforts for maximum impact. It also helps you make investment decisions to rectify deficiencies that might otherwise have gone unnoticed.
One of the most common deficiencies for many companies is customer experience (CX). They forget that CX is the sum total of all interactions with customers, including post-purchase. The goal is to provide enduring value to customers throughout their lifecycle, and that means making sure they’re just as happy with their purchase on day 1,000 as day one. If you were to follow-up with a past customer and make sure he or she doesn’t have any additional questions, it can often lead to a deeper engagement.
In turn, that deepened engagement can translate into a larger deal the next time around, resulting in a higher CLV.
Besides, customer churn is a silent but very dangerous trend. If you’re not tracking this along with CLV, it could have disastrous consequences for your business. Think about what something as simple as an email can do to reassure customers that you’ve still got their best interests in mind. The expense is minimal, and with technology being what it is, you can provide the illusion of a one-on-one communication — plus the channel is totally measurable. You know exactly whether someone has opened the email.
That’s my very long way of saying: Focus on customer experience. You want to communicate with past customers regularly, personalize your messaging, and follow-up with anyone who you haven’t heard from in awhile. There’s a reason he or she dropped off your radar, and you should want to know why.
How you go about improving the customer experience will vary by target audience, but there are a number of tactics that can prove beneficial no matter the business. The following are often the best places to start:
Ultimately, way too many businesses devote way too much time and money on acquiring new customers. Don’t get me wrong; I’m not saying you should divert your entire customer acquisition budget to customer retention. You still need to fill that funnel with new blood, just not at the expense of your current customer base. These people and businesses are important. Treat them as such.
Originally posted on Microsoft’s blog.
Publish Date: February 7, 2020
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