Why customer retention beats customer acquisition
As digital ad spend continues to hit the headlines due to accusations of fraud and the misrepresentation of conversion, it’s time redress the balance between acquiring new customers and showing your current ones a little more love.
In 2018 Facebook1 came under fire for knowingly inflating its video metrics, in order to convince businesses that their ad spends were having more impact than they really were. And this wasn’t by a small amount. Estimates at the time were that video metrics were inflated by somewhere between 60% to 80%.
In 2017 Google Ads2 were under the spotlight when paid ads were being placed next to extremist and hate-fuelled content, something Google says it later fixed.
In a fantastic article, The Imminent Collapse of Digital Advertising3, journalist Scott Galloway explores the murky history that surrounds the profits-over-positive-engagement mentality of Facebook, Google, YouTube and more. A further source to Oxford Biochronometrics (a leader in digital fraud) even estimates that 88% of digital ad clicks are fake, driven by AI and bot traffic that artificially increase the ROI metrics businesses are seeing.
The rise of customer retention
In parallel to the rise of digital and AI-driven advertising technology, customer retention has also been getting smarter.
Going back to business basics and the Ansoff Matrix4 of marketing strategy – the simplest path to increased profit is by offering existing products to existing markets: or rather… catering even more to the needs of your existing customers, rather than spending all your energy looking for new ones.
There are very good reasons for this.
First, you know who your current customers are: you know their names, you probably have their email address, and you know what they have bought from you before.
As eCommerce and CRM software has evolved, we’re now able to additionally see what they haven’t bought (through basket abandonment), what they weren’t interested in (through automated email flows) and what their lifetime value to your business actually is.
How to readdress the balance of customer retention
According to Forbes5 in February of this year, there are three reasons why historically we’ve targeted new customers, rather than making more of our existing ones:
- Sales offers have historically been positioned through external advertising
- The maturity of lead generation technology has followed that same budget
- It’s been easier to associate new revenue to sales activity, rather than retention
However, the technology of customer retention is catching up, and so the only decision you should make as a business is: ‘Just how much of your advertising budget would you like to invest, instead, on your existing customers’?
At 44 Digital, we’re focussing our time on perfecting new ways to engage with your current customers, including:
- Smart email and SMS campaigns and behaviour-triggered auto retargeting (Find out more in our case study)
- Basket abandonment and customer referral strategies
- On-page up-sells, cross-sells, and offers
- Content marketing and social engagement
However, technology aside, it’s important to remember the human side of what your business is about. After all, as the great Maya Angelou said: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”