The retail apocalypse is upon us.
The first three months of 2017 have seen record-breaking bankruptcies in the retail sector, with 14 chains seeking court protection — nearly total the number for all of 2016.
Keeping the interest of today’s digitally inclined consumers has become an Amazonian task for brands across all verticals, of course. Customers expect easy, immediate and frictionless brand experiences at every touchpoint. If brands don’t deliver, customers are quick to jump ship — and this leaves many marketers up shit creek.
Under intense pressure to fill the void of incessant customer churn, marketers continue to pour money into acquisition. According to recent Signal research, over 60% of chief marketing officers are unhappy with their customer retention rates, yet nearly 75% name new customer acquisition their top priority instead of finding ways to keep existing customers coming back.
And we’re not alone in our findings. In a recent Forbes and Sailthru study of global media and retail brands, acquisition budgets increased by 79% compared to just 42% for retention. When companies more focused on acquisition were asked why, nearly 85% said they defined their customer strategy by doing things “the way they have always been done.”
Obviously, gaining new customers will always be essential to any business. And acquisition’s immediate results certainly help to spruce up spreadsheets and justify budgets. But conversion rates don’t create lifetime value. What does is engaging customers with relevant, meaningful and seamless brand interactions that foster long-term relationships and brand loyalty.
In today’s uber-competitive marketplace, marketers can’t afford to keep retention strategies on the back burner. Here are three reasons why marketers need to make customer retention a top priority.
1. Create the path to high lifetime value.
Historically, once a new customer has been acquired, brands use their owned channels to further the relationship. This poses great limitations — namely, speed, relevancy and context — and often results in outdated, inconsistent interactions that offer little value and great annoyance.
But thanks to the recent progression of customer identity solutions, marketers now have a way to use this new consumer data to reach shoppers in paid media. Rooting customer profiles in persistent identifiers, marketers can connect a brand’s first-party data to digital media and reach people at significant moments throughout the customer lifecycle. Looking beyond that first transaction and strategizing how and where to communicate during times of discovery, decision-making or post-purchase, brands can maintain an ongoing dialogue that fosters long-lasting relationships, reduces customer churn and increases lifetime value.
2. Get more bang for your buck.
It is infinitely more expensive to try and convert all consumers into fans. For five times less the cost, marketers can identify their best customers, strategize ways to offer them more value and, as a result, bring more value to the brand.
Customers who are highly engaged with a brand are two times more open to upsell opportunities and six times more likely to try a new product or service. They are less price-sensitive and five times more likely to only choose that brand in the future. And they spend three times more with the brand each year. Even more, loyalists like to talk: They are four times more likely to advocate the brand to acquaintances and colleagues.
3. Stave off revenue risk.
Creating brand loyalty is no longer a function of price or product. What matters most to customers is that they find what they want, their needs have been met and their goals achieved — at the exact right moment, of course. And if this doesn’t happen, they are quick to cut ties: 82% of consumers worldwide have stopped doing business with a company following a bad customer experience.
This is the new norm, and the financial impact is extraordinary. Each year U.S. businesses lose $62 billion due to poor brand experiences — three times more than just three years ago.
Brands are now being forced to choose between acquiring new customers to at least remain flat or increasing the value of existing customers. My money’s on the latter. With 40% of consumers already demonstrating a high willingness and ability to shift spend elsewhere, and with another 25% building on that mindset, companies are expected to face up to a 50% increase in revenue risk. Retaining customers and reducing churn has never been more critical.
With 2017 already outpacing even recession-plagued 2008 with store closings, it’s clear that spending huge amounts of time and money on acquiring customers that may never convert is risky business. If marketers want to turn the tide, they need to let go of outdated acquisition strategies and focus on making the customers they already have more valuable.