Ignite your passion
It is well known and generally accepted that the cost of acquiring new customers is 5x more costly than retaining existing ones.
In the typical sales funnel, when you factor in marketing costs & sales headcount this is becoming increasingly challenging. To top it all, very few prospects are amenable to moving suppliers or products unless the pain of change is worth it. In other words, margins are cut in the acquisition race - unless you have a great salesperson who sells on service/value etc. Ultimately this means it's tough to get a decent ROI.
The iceberg effect especially when acquiring B2C clients, is the associated risk of unknowns. New clients who are often first-time-buyers, bring the highest risk of credit default. Ironic then that most businesses still deem it prudent to upping the ante and throwing the angel, tree and tinsel at new clients.
Breakeven acquisition costs are being pushed into uncharted territories every day - it's not uncommon to see in breakevens only after two years! This is bad business however you slice and dice it. Sadly, where customer base size is still being seen as the primary yardstick for success, the red-headed stepchild of average revenue is truly where the gold lies.
Do you want bottom line profit or the vanity of a bloated customer base that costs you more to keep growing and servicing?
The elephant in the room is retaining what you have, and nurturing that like you would you own child. Would you over-feed them until they become sick and obese? Would you neglect them and only give them the bear minimum to survive? Probably not.... Balance is required, but the primary intention is that they grow into the adults you would be proud of.
Customers leave when they feel they are being abused or neglected, and the underlying essence of this is TRUST. By not proactively engaging with them to understand what they really want, you are laying yourself open to being ravaged by the Viking hoard! In the blink of an eye your hard-acquired customer base has leaked out like water from a bath.
So how do you keep the bath plug in place, or at least secured enough to minimise the leakage?
The fish rots from the head. Until the shareholders and Boards have RETENTION at the core of the business and are committed to throwing everything at it, this will only be a buzzword. Paying lip service to customer retention strategies are unfortunately commonplace, and they continue to default back to chasing the new numbers of acquisition. Don't get me wrong - it's critical you keep topping up the bath and growing, but it's so much easier when your boat doesn't have leaks!