Retention strategies essential in tough times

While the big brands bombarded the market with all measure of creative customer acquisition campaigns during the boom times, few paid enough attention to keeping their existing clients satisfied and coming back for more. With the honeymoon over and marketing budgets slashed as the global recession deepens, many are now realising the true value of an existing, loyal client.

This is according to Ian Geary, Managing Director and founder of Computer Facilities, one of South Africa's leading specialist direct marketing bureaus and a founder member of the Direct Marketing Association of South Africa.

"If you had to analyse how many customers you have lost in the last 12 months, chances are the figures are between 10% - 40%. They have left you and will never return, either because of poor service, lack of delivery, or simply a better deal elsewhere.

"Customer retention is a highly cost effective and profitable strategy. In fact in our current business environment it is crucial if one considers the rule of thumb that 80% of your sales come from 20% of your customers. When one analyses the cost of a lost client and the further costs to recoup another, the case for sound retention strategy becomes even more compelling," says Geary.

Many companies measure their marketing campaign success by the number of new client acquisitions, signed contracts and the subsequent value of these to the company. "Very few invest the same amount of effort and research into their calculations to make them truly relevant and accurate by factoring in the number of clients who have defaulted elsewhere and the total cost of each lost client to the company," he says.

With these statistics, an astute marketer would be asking why most marketing and sales campaigns are only designed for the new customer.

One just has to look at the deals currently on offer from the mobile phone providers or the telecommunications companies. If you sign a new contract you are given a large rebate, free handset, hands-free kit and more - all in a mad dash to outbid their competitors for the sweetest offer. If you are an existing customer you have the privilege of paying full price. When last have you seen a great customer retention campaign that rewards customers for their continued business and support?

"Statistics have proven time and again that it is at least five times more profitable to invest your marketing spend in retaining existing customers than it is to acquire new customers. While we are not by any means advocating that acquisition is put on the back burner - indeed it is crucial to the future and continued growth of any business - it is vital that a balance is found between acquisition and retention and to ensure that customer defections are not offsetting acquisitions," says Geary.

Sophisticated technology and database software has enabled highly effective customer retention strategies through database marketing programs. By establishing a detailed client database, companies can keep track of personal information and individual preferences of all their customers, making for greater service and added value offerings at the touch of a button.

"Through a strategically managed retention programme, you not only get to reconnect with your customer, but you also get to clean and update your database, your most valuable asset in a depressed economy," Geary says. "Managed effectively, new information can feed through the system, saving money on outbound calls to wrong numbers and reduce your number of nixies in a direct mail campaign."

If you're looking for enhanced cost efficiencies, retention is the way to go - it's vital to a company of any size, when you recognise that is always more expensive to land a new customer than to keep an existing one. Existing customers already know who you are you so you end up spending a lot less "marketing money" to sell them a new or additional product or service.

Furthermore, existing customers who have had positive experiences will become repeat customers and more likely to promote your service to friends and family. In our current tough and competitive economy, keeping your existing customers has never been more critical.