Retention marketing
Retention marketing has been described by some as a new form of marketing, but as far back as 1984, marketing scholars Professors Larry Rosenberg and John Czepiel had already begun the conversation on “A Marketing Approach for Customer Retention”. Their review focused on the importance of cultivating relationships with existing customers; concluding that well balanced marketing efforts between winning new customers and keeping old ones would “prove instrumental in pursuing sales and profit growth in the 1980s”. Today, thirty-four years on, the spotlight is back on retention marketing as an important part of growing a sustainable business.
What is retention Marketing?
Retention marketing refers to the activities that a company or a brand will utilise in order to retain or keep its existing customers overtime. The goal of retention marketing is to increase the likelihood of repeat business with a customer, while focusing on increasing profitability through increased purchase frequency. Ultimately, retention marketing will boost these two metrics, repeat business and purchase frequency, to increase the company’s customer lifetime value (CLV), which is hailed as one of the most important metrics for attaining long term profitability.
Retention vs Loyalty
There appears to be a fine line between what constitutes retention marketing as opposed to loyalty programmes. We cover this more in-depth this arcticle. But to put it simply, retention measures whether existing customers will continue to do business with your company, while loyalty measures a customer’s predisposition to consistently choose a particular brand over others, also exhibiting a certain resistance to the brand’s competitors. However, the activities that a company may use to engage with customers in both instances may be similar.
What Does Retention Marketing Mean for Your Business?
At the heart of retention marketing is reducing costs and increasing profitability. It is an established industry-wide thought that it is cheaper to get current customers to make repeat purchases than it is to acquire new ones. A study by Harvard Business School found that acquiring a new customer is up to 25 times more expensive that retaining an existing one. The same study also found that increasing customer retention by just 5% increases profits by 25% to 95%.
Some businesses achieve this by establishing an in-house dedicated retention marketing team that is responsible for developing a strategy for implementing a collection of activities to increase customer retention. Other business may choose to use specialist retention marketing tools to achieve their objectives.
Depending on what industry your business is in, especially for ecommerce businesses where clicks and conversions are easily measurable, it makes sense for your business to devote more time and resources to re-engage current customers to come back, and to look after them until they make their next purchase. That doesn’t mean that you neglect attempting to win ones altogether, as Professors Rosenberg and Czepiel asserted all those many years ago, balancing marketing efforts between the two activities is vital for any business.
References[edit]
https://www.investopedia.com/terms/b/brand-loyalty.asp
https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
https://doi.org/10.1108/eb008094
This article "Retention marketing" is from Wikipedia. The list of its authors can be seen in its historical and/or the page Edithistory:Retention marketing. Articles copied from Draft Namespace on Wikipedia could be seen on the Draft Namespace of Wikipedia and not main one.
