Research shows that it costs between 5 and 20 times more to acquire a new customer than it does to keep an existing one. When you translate those figures into hard costs, the numbers are even more frightening – in the travel industry, it costs $7 to acquire a new customer, and it can cost up to $395 in the technology and software industries.
Given the fact that 90% of all start-ups fail within their first two years, many people are beginning to wonder if the old rule of thumb to spend 10% of your revenue (or planned revenue) on marketing is enough. Perhaps some of those start-ups would benefit from a more robust marketing budget of, say, 15% or 20%.
When a prospect turns into a customer for your business, that’s great news, but it doesn’t necessarily mean that a thriving relationship will follow. Over the course of time, the “new relationship buzz” wears off and even the most enthusiastic new customer begins to lose interest. In those cases, investing in a customer loyalty program might help solve the problem. After all, even the best word-of-mouth reputation can use a little help now and then.
Investing in Customer Retention
A solid customer retention strategy is one way businesses manage to keep existing customers engaged. The same techniques can be used to bring back “one off” customers who have started to use a competitor’s product or service.
Although it seems counter-intuitive to give products away for free, the feeling of being rewarded unlocks a feeling of connection with a brand, creating an added level of commitment and the thrill of racking up points for a future reward. (For examples of this, check out Tesco’s Clubcard, Sainsbury’s Nectar points, and pretty much every coffee shop in the world.)
If you’re like most people, your inbox is currently packed with marketing emails that are waiting to be read and/or deleted. Some would argue that having a healthy open rate isn’t the goal for many of these companies – their goal is to have a gentle reminder that the company exists in the hopes that someday the customer or prospect will click through and buy something some day.
Techniques for Getting Customers to Come Back for More
The need for innovative customer retention techniques has never been greater. Online gambling is a particularly competitive industry, with lots of companies offering a similar experience and relying on a variety of techniques to keep customers coming back.
Wink Bingo use a clever “spin the wheel” promotion to drive repeat deposits. For every £10 spent on the site, customers get a spin which gifts everything from bonus funds to play with every spin of the wheel. The opportunity to win is exactly what their customer base is looking for, delivering a reward for something that the customer would be doing anyway, at little cost to Wink Bingo.
Other Tips and Techniques
One of the easiest customer retention strategies that doesn’t cost a great deal of money is the long term recognition reward. This is less about earning points or chasing that tenth cup of free coffee – instead, it’s more about personal recognition from the company for the loyalty of a long-term customer. Sky have recently launched a VIP service aimed at customers who have been with Sky for not only months and years but decades, with repeat customers given enhanced service, discounts and add-ons free of charge.
In a ‘disposable’ society where phones last as long as it takes to develop a new one and businesses are happy to push back on service agreements, it’s important to realize that the customer is still always right.
Just look at Uber, a taxi service that rates customers and will turn them down for taxi rides if they don’t have a good ‘rider history’. They are now suffering, thanks to competitors who will drive any paying customer around and won’t force a surcharge on them if it’s busy. The customer-company relationship seems to be coming full circle again, and it’s not the apps that track loyalty (but forget how to make someone feel special) that are winning. Instead, it’s the businesses that decide to give that long-term customer a freebie every now and then.