Marketing Database Optimization Best Practices
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Retaining Existing Customers Vs Acquiring New Customers – Whats Is The Better Strategy?
A great question in this economic climate and something a lot of companies will be debating on as a strategy till things are looking up again. Iain Lovatt of Blue Sheep Limited took this question to the B2B marketing group on Linkedin where it sparked a healthy debate on whether marketing should turn all focus to customer retention and keeping the revenue stable or turn to new customer acquisition. The opinions B2B marketers posted come to defend both sides.
The first side believed yes, all focus should be directed towards retention of existing customers. If you have a customer base which helped you bring in $X in revenue, then in such fickle times, rather than trying to tap into new customers which may or may not close, you are better off trying to convince your existing customers to buy again or extend contracts with you for another year. This strategy reduces the risk of a drop in revenue in case new customers don’t close and can’t compensate for old customers who don’t bring in continued business. In some way since you don’t need to educate existing customers on your offering again, the cost of marketing to existing customers is lower. In times when customers are more cautious and take longer to commit, the number of leads or target contacts required in the funnel is also higher and it could make sense to try and stablilize revenues till conditions are more favorable.
The flipside of the coin was not against diverting resources towards customer retention but not at the cost of cutting our new customer acquisition completely. B2B marketers on this side of the debate suggested this time when lots of changes are taking place and several companies folding or losing part of their customer base, could actually be an ideal opportunity to try and capture some of those customers and take a bigger part of the market share. They agree focus should be on retaining high value existing customers who bring in a sizable amount of bussiness but believe its also important to pursue new customers since there will always be some churn in existing customers and even just to maintain the existing level, new customers are essential.
The sweet spot should actually be right inbetween. Though its easier said than done, being able to retain as many of your valuable existing customers as possible without having to cut off efforts of targeting new customers (some of whom will turn into future high value customers) is what will trigger growth. While its important to work with what you have and tapping into your existing database of leads, not acquiring new leads and growing that database will result in a shrinking database as it deteriorates with time. Doing one at the cost of cutting out another totally wouldn’t help in the long run. Finding that balance should be the aim. What do you think?
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April 14th, 2009 at 9:33 pm
A good marketer will know when the cycle has to leave the old customer and shift to new target markets. None the less, it is a wise choice to never burn bridges. That is what I think anyway. Hopefully it added some insight. Thanks for letting me share it.
April 16th, 2009 at 5:06 pm
This post, as well as the first comment, speak in very general terms about retaining current customers vs. seeking out new ones. Businesses do not have the luxury of doing one or the other. Obviously, a happy medium must be found. But the key is, what resources are used to retain customers, and what resources are used to seek out the new ones? This is where specific strategy comes in. It costs a LOT more money to seek out the new customer, to entice him to buy, to win his confidence to buy again. You've already done this with your current customer – he doesn't need to be convinced. However, if he sees that you are giving away special promotions and deals to new customers, when the old customers are not eligible, he WILL feel unappreciated, and he WILL take his business elsewhere. Customer retention does not have to be costly, certainly not as costly as finding new customers. It's about the little things – providing a consistently excellent customer experience, remembering the customer's name and preferences, communicating interesting, useful information to the customer. This is what customers seek. If you show this kind of love to your current customers, THEY will then spread the word to their friends and colleagues, and THEY will bring you your new customers.
April 17th, 2009 at 12:06 am
This post, as well as the first comment, speak in very general terms about retaining current customers vs. seeking out new ones. Businesses do not have the luxury of doing one or the other. Obviously, a happy medium must be found. But the key is, what resources are used to retain customers, and what resources are used to seek out the new ones? This is where specific strategy comes in. It costs a LOT more money to seek out the new customer, to entice him to buy, to win his confidence to buy again. You've already done this with your current customer – he doesn't need to be convinced. However, if he sees that you are giving away special promotions and deals to new customers, when the old customers are not eligible, he WILL feel unappreciated, and he WILL take his business elsewhere. Customer retention does not have to be costly, certainly not as costly as finding new customers. It's about the little things – providing a consistently excellent customer experience, remembering the customer's name and preferences, communicating interesting, useful information to the customer. This is what customers seek. If you show this kind of love to your current customers, THEY will then spread the word to their friends and colleagues, and THEY will bring you your new customers.
August 24th, 2010 at 8:22 am
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