Customer Retention — the Next Frontier for Today’s CMO
Heard these before? We’re living in the age of the customer, and it goes well beyond buzzwords.
Most of us have been told that it’s cheaper to keep a current customer than to find a new one. But did you know that a 5% improvement in customer retention rates can result in a 25 to 95% increase in profits? (Opens as a PDF)
Customer retention can be a small change with major impact. And yet, many CMOs don’t champion retention as a top priority — even though it plays a large part in their long-term success.
Writing in the Harvard Business Review, leaders from Bain & Company stated:
“The high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. “The high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. “
The length of the customer lifecycle is one of the reasons why marketers don’t always have customer retention top-of-mind. Unlike lead generation or customer acquisition, retention campaigns take longer to produce results. Segmenting and categorizing customers in order to personalize experiences is complicated work. And it takes time to uncover and satisfy unmet needs in the customer experience.
But a 25 to 95% increase in profits is certainly worth it. Additionally, more findings by Bain & Company indicate that a 10% rise in customer retention yields a 30% increase in the value of the company.
So what can marketers do to boost retention?
1. Play a Role in Onboarding
Call it client education. Call it a welcome series. Call it whatever you want. Just don’t nab the sale and then dump your new customers. Develop welcome emails (a.k.a. customer onboarding) that shows customers how to maximize value from their purchase. Offer video tutorials, on-demand webinars, or case studies, so they can become familiar with the product and see a path to success. Then point them to how to find help for themselves, including how to find the right person or resources at your company based on their question or need.
2. Be in Constant Contact
Talk to your customers and figure out what they value the most. Ask them how you can get better, what they like and don’t like, what’s going wrong, and how your service could fix the issue. Solicit feedback through surveys and outreach.
3. Segment Your Base
There’s a big difference between a customer who has been faithfully using your service for months and one who didn’t convert after a free 30-day trial. Segmenting your customers into different groups can help you target them correctly for different circumstances, like conversion vs. recovery.
4. Build a Customer-First Culture
Marketing teams can often fall into the trap of reacting to the whims of other departments, and go into execution mode without really understanding the customer problem trying to be solved. CMOs can drive proactive initiatives by championing a more offensive approach and working closely with the customer success team to stress deeper customer relationships. When employees see the C-suite advocating for customers on a daily basis, a customer success culture will become a part of the company's DNA.
5. Identify the Right Metric
Identify your North Star Metric (NSM) or the metric that illustrates the value gained by customers (e.g. Airbnb tracks “nights booked”). And then identify how marketing efforts impact this number. This will probably feel odd, if you’re accustomed to tracking clicks and conversions. That said, the more value a customer extracts from a product, the more likely they are to be retained, and every department — marketing included — has a part to play in optimizing for the NSM.
Smart CMOs Balance Acquisition With Retention
It can feel like it’s in a marketer’s DNA to focus on customer acquisition, but it’s time for a major shift. Savvy CMOs recognize that customer retention is critical, because it measures not only how good they are at acquiring new customers, but how successful they are at satisfying existing customers.
Instead of looking beyond their customers to bring in new business, marketers should turn their attention to the customer base already within their grasp, and invest in keeping current customers happier longer, so they can generate more business than acquisition alone ever could.