Where Should You Be Focused—Customer Acquisition or Retention?

By: Ross Quintana | November 14, 2017 | B2C Marketing, Personalization

In a business environment where customer loyalty is at an all-time low, attention is hard to come by, and competition is always growing, it is no wonder businesses are constantly looking for new customers. But we’ve all heard the idea that “It costs more to get a new customer than it does to keep an old one.” True, acquiring a new customer is 6-7x more expensive, according the the White House Office for Consumer Affairs. Yet a recent survey by Social Media Today found that 63% of businesses felt new customer acquisition was the most important goal. This means that most businesses are focusing on the wrong metrics, so the question is, why?

The drive to meet expectations

The problem stems from a push to meet expectations, whether from a boss, the C-suite, or shareholders. Constant demands for more profits and optimization and demands brought on by new competition have forced short-term thinking by leadership over the last two decades. This short-term thinking is at the heart of the ‘new customer’ growth mindset. As social selling expert, author, and speaker Shane Gibson says:

“It’s easier to make promises to new customers than it is to consistently deliver to and retain existing customers (in a quarterly shareholder-focused world). Everyone’s focused on ‘impersonalizing’ and automating client acquisition—but they forget the burn and churn cycle it creates. Just think: What if we attracted fewer customers but retained and grew accounts successfully?”

He touches on two key points here: 1) Marketing focuses on the promise of delivering on the product and service to new customers, while working with past customers is about delivering on what your marketing had promised, and 2) There’s a drive to automate and become disconnected from your customer, which he refers to as impersonalizing.

Founder of Purematter Bryan Kramer states it in very simple yet profound terms:

“Thank you’ is always easier than asking ‘what can I do for you?’”

The common misconception is that getting a new customer is easier than maintaining a relationship with past customers because new customers can be acquired at scale whereas existing relationships are harder to scale. But the problem is that you create a constant churn that is expensive to maintain. This damages brand affinity over time because you are increasing the amount of customers that are being let down while burning through your market at a faster pace. This seems to be the approach of those who want to show short-term gain without giving thought to the long-term health of an organization or the brand. It also means that your customer base is made up of new customers who don’t have any loyalty to your brand beyond their recent purchase.

There is a problem in the data

Marketers have been accused of showing client vanity metrics that look good but aren’t really delivering business value. In reports it’s easy to show you are generating new revenue through marketing efforts, but it creates a false sense of security when in reality the brand may be losing customers as fast as they are gaining them. One metric doesn’t tell the whole story; you need context for the data to understand what is happening with the business. Ryan McKenzie, CMO of My Passion Media says:

“I think too many companies look at existing customers as a ‘retention problem’ as opposed to an ‘ascension opportunity.’ Create new opportunities for existing customers to give you more money and to become raving fans—then watch your business separate from the herd.”

Growth is important, but it is easier to sell another product to your existing customers—and it’s more cost effective, too. The cost of reaching new prospects as well as the risk that they may not convert is too high when you have past customers who have already shown they will buy from you. Short-term acquisition thinking always hurts the business and the customer. It’s time to focus on the metrics that matter—long-term business value gained by customer retention.


If you want growth, then grow something

Anthony Denardis of Shop Local Media likens this conversation to the hunter vs gatherer scenario. Hunting is all about the kill, while gathering or farming requires nurturing over time to yield the bounty. In the National Geographic documentary Guns, Germs, and Steel, Jared Diamond studied why some cultures today are highly advanced and others are still living very primitive. One of the key factors he found was the difference between how they ate. A hunter for example ‘works today eats today,’ which points to short-term thinking. On the other hand, a farmer can grow a crop that can last him a whole year or more. This requires more nurturing but also provides more long-term resources.

Therefore, if the majority of time and money is spent trying to get new customers with marketing, what if you didn’t need a bunch of new customers because the old ones were coming back and buying more? Where could that time and money savings be reinvested? Case in point: If you want to grow your business, then focus on developing relationships with the people you already spent time and money attracting. Technology can now facilitate growth in many ways, like AI-powered tools that bring an unprecedented level of personalization to consumer messaging and can be used to nurture and compel customers you already have.

The answer is personalization, but what is the question?

Personalization is a hot topic right now as artificial intelligence is creating the possibility to personalize messaging at scale and in real time. If your question is “How can we automate some of our marketing and make it feel more human?”, then AI-powered personalization is the answer. (Yes, AI does make marketing more human, contrary to popular thought). Or if your question is, “How can I make every one of my past customers feel like our brand values them?”, then the answer is AI-powered personalization, too. An AI-powered approach to personalization helps create relevance and as a result, build consumer-brand trust & loyalty. In a world where there is too much marketing noise, consumers will be automatically drawn to things that are relevant to them and ignore everything else. The good news is your brand is already relevant to a past customer so using AI-powered tools to create a hyper-personalized experience can help gain their long-term interest and loyalty. CEO of BarrettPR Jeff Barrett nails it with this quote:

“Every industry is different but, and I know this sounds crazy, the most likely future customer is an existing customer. Being able to use extreme personalization and AI to strengthen that bond is paramount. Look at Amazon and Apple. They aren’t selling you just one new product. Once you’re with them they create solutions everywhere for you, to keep you in their ecosystem. That’s retention. That should be the focus.”

Personalization to past customers is the key to relevance. This shortens the buying cycle. Establishing trust is the hardest thing to do with a stranger, but you already have that with a past customer. This trust allows so much more of your actual brand messaging to be heard. This drives easier sales with less resources.

The good advice you didn’t take

When proposing a change in the way you do business and where you spend your budget, the hardest thing to do is to justify the cost. Executives want proof to support the ROI of your strategy and there is plenty of proof that nurturing past customers makes the company more money. AI and personalized messaging is the key to doing this at scale while developing loyalty. The tools are there, the proof is there, and now it will just take leadership to agree and execute.


Want to hear more? Gain more learnings about how artificial intelligence can power your marketing and impact the things you care about, like engagement, conversion, and retention, by checking out The Kahuna Blog. Simply click the button below!

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Author: Ross Quintana

Ross Quintana is Founder and Chief Analyst of Social Magnets, a marketing company that helps brands grow their online audience and authority. He is ranked in BuzzSumo's Top 100 Social Media Influencers, is host of Social Magnets Live, and is a contributor at CMO.com. He provides insights and thought leadership in the MarTech and CX space.

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