Retention Marketing

In previous chapters, we talked about the benefits of customer retention — most notably, increased profitability and customer loyalty — and how to measure it. By now, you should understand the importance of this concept and how to figure out where you stack up. But what if you need to improve your ability to retain customers? […]

Chapter

Retention Marketing

In previous chapters, we talked about the benefits of customer retention — most notably, increased profitability and customer loyalty — and how to measure it. By now, you should understand the importance of this concept and how to figure out where you stack up. But what if you need to improve your ability to retain customers?

This is a common challenge. It's one thing to understand why you need to keep track of certain metrics in your eCommerce business, but when it comes to translating ideas into action, it's often easier said than done. The key to bridging this gap is retention marketing.

What Is Retention Marketing?

Retention marketing is the execution of any marketing strategy aimed at getting customers who have done business with you in the past to continue in the future. Instead of looking outward for potential new customers, you're looking inside your customer database and looking for tactics that will help keep them loyal to your brand longer.

Acquisition Marketing vs. Retention Marketing

If retention marketing is reaching out to current customers and enticing them to continue making purchases, acquisition marketing is the opposite: delving into cold audiences, building brand awareness, and enticing prospects to make their first purchases.

Acquisition marketing is looked at as a way to grow a customer list and drive more revenue by increasing the number of purchases made in an eCommerce store in a given period of time. Both acquisition marketing and retention marketing have benefits and drawbacks, making the decision to focus on one, the other, or both complex for many entrepreneurs. Here are some important things to keep in mind about both retention marketing and acquisition marketing.

Retention Marketing Benefits

The benefits of a retention-focused strategy has been covered thoroughly in earlier chapters of this guide, and when it comes to retention marketing specifically, it's more of the same.

Lower Cost and Higher ROI

What we've been saying rings true here as well: it's less expensive to keep the customers you have than to find and acquire new ones. In fact, your likelihood of success selling to an existing customer is about 60-70% compared to just 5-20% selling to a prospect. This means that every dollar you spend will have a higher return on investment (ROI) when you focus on retention — your marketing budget will go farther, in turn, costing you less to achieve the objectives of your brand.

There's also reason to believe that ROI actually increases as you're able to foster stronger brand loyalty and increase customer retention. As a customer becomes more engaged with your brand, it takes less to keep them engaged and making repeat purchases, lowering the cost of retention over time.

Brand Advocacy and Referral Customers

The customers you retain are your most loyal and satisfied customers. Otherwise, they'd likely take their business elsewhere. Retention marketing enables you to isolate loyal customers and continue to give them an experience that motivates them to recommend your brand to friends and colleagues.

One study found that loyal customers are around four times more likely to refer to the people around them, who then have a high likelihood of becoming customers themselves. These "referral customers" are new customers that you'll be able to bring in without needing to spend a dime on acquisition.

Better Reputation and Brand Image

When you're holding onto customers longer, it correlates with a positive reputation and brand image. Customers respond positively to valuable interactions with your brand, and aside from recommending your store the people around them, they'll also leave reviews reflecting their trust in your eCommerce business to add value to customers' lives and experiences.

This also benefits your ability to acquire new customers organically, because consumers are much more likely to purchase from a brand with a positive online reputation.

Acquisition Marketing Benefits

Of course, all this isn't to say that retention marketing is the only strategy that should be considered. Acquisition marketing has its own benefits in certain scenarios.

Larger Customer Base

If you're trying to grow the number of customers you have quickly, your only choice is acquisition marketing. This can be useful when you're first starting out and building your brand — at this point, your store won't be able to focus on customer retention heavily because your customer pool is not large enough yet.

Better Brand Awareness

Brand awareness and name recognition increases with the total number of customers you have. While retention marketing fosters a loyal group of brand disciples, if you're looking to close a gap and make as many people as possible aware of your business, you'll want to work towards bringing in new customers and marketing to cold groups more than the average eCommerce store.

"How much of my budget should I allocate to Retention Marketing vs. Acquisition Marketing?"

Only 18% of businesses say they focus more on retention than acquisition. But, if your eCommerce business is established, it may be a grave error to ignore current customers in favor of finding new ones.

Not only is retention marketing cheaper than acquisition, the customers you focus on will do more than just purchase again. They'll also purchase more (and spend more money). When you invest in growing customer lifetime value (CLV) over the sheer number of customers you have, you're able to forge more valuable relationships that will stick with you in the face of many challenges that you may face in the future.

We don't recommend ignoring acquisition marketing entirely, but your budget balance should be closer to 50/50 or even favoring retention if you want to have the best chance to benefit from it.

Retention Marketing Strategies

In the next chapter, we'll delve deeper into the nuts and bolts of a high-performing customer retention marketing strategy. For now, here's a taste of the kinds of things you should be focused on in order to keep customers engaged, loyal, and less likely to look elsewhere for their next purchase.

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