Retention Now A Bigger Personalization Priority Than Acquisition https://t.co/xzNwC09JUa @marketingcharts @Yieldify
— marketingcharts (@marketingcharts) October 2, 2020
I started to include this story in yesterday’s Marketing Minute post, but it’s so important that I wanted to expand on it a bit. Research is showing that marketers are shifting from focusing on customer acquisition to focusing on customer retention. Some of this is attributed as a reaction to the pandemic, as marketers believe customer acquisition will be easier as buyers are seeking out sellers, especially online. But also, most of us are wanting a return to normalcy and are more likely to stick with brands we know and trust. This just stands to reason.
But the debate over customer acquisition vs customer retention is one of my favorite topics, because so many companies completely mismanage the acquisition of new customers. One of the key teachings in my book Think Like a Rock Star was the difference between how rock stars acquire new customers, and how most companies do.
In short, most companies attempt to acquire new customers via advertising, while most rock stars acquire new customers via their current customers.
Now would be a good time to review The Loyalty Graph:
For The Loyalty Graph, the x-axis is Brand Loyalty. At the left there is 0 Brand Loyalty, as you move all the way to the right, Brand Loyalty is at its highest levels. These would be your ‘Fans’. The y-axis is Size of Market. At the bottom there is no market, at the top there is a massive market. Let’s look at each customer segment:
New Customers – These are customers that have bought from your company for the first time, or potential customers. Their Size of Market is massive, but they also have little or no Loyalty toward your brand.
Existing Customers – These are customers that are currently buying from your company. Note that the size of this group is much smaller, but levels of Brand Loyalty have gone up slightly.
Some Brand Affinity – These are regular customers, who have some affinity for your brand. They buy regularly, they probably like your products enough to endorse them to other customers, even if infrequently. The size of this market again shrinks dramatically, but loyalty levels also rise.
Brand Advocates – These are your ‘fans’. The customers that love your brand, that buy your products constantly, that promote those products endlessly to other customers. The size of this market is very tiny, but their loyalty levels are at maximum.
What’s fascinating about this graph is to note that companies and rock stars focus on opposite ends of the Brand Loyalty axis. Companies focus almost all their attention on marketing to New Customers, while rock stars focus almost all of their attention on Brand Advocates.
Why is this important? When you see that New Customers are by far the largest market, it’s easy to see why most companies focus on this group. But while the size of this group is massive, notice that New Customers have almost no loyalty toward your company. So most companies are literally marketing to a group that has no interest in hearing their message. This is why advertising is so expensive, because you are paying for the fact that your message is interrupting people that don’t want to hear that message. Also note that most companies spend little or no attention to their current customers and fans, who actually have an interest in hearing their marketing messages.
Now notice that rock stars focus almost exclusively on their Brand Advocates. Brand Advocates are by far the smallest market, but notice they have the highest levels of loyalty toward the brands they buy from. Also, think about what brand advocates do: They advocate for your brand. Brand Advocates acquire other customers for you! They promote your brand to other customers and encourage them to buy from your brand. And unlike New Customers, Brand Advocates WANT you to market to them! They are desperate to hear from your brand and have more contact with that brand.
So think of the contrast: Companies spend billions to market to a group (New Customers) who does not want to be marketed to. On the other hand, rock stars only attempt to connect with the group (Brand Advocates) that wants to hear from them!
Companies spend billions on advertising to acquire New Customers, rock stars market to their fans and let their fans acquire customers for them.
Which method is less expensive? Which method is more effective? Obviously, letting your current customers acquire new customers for you the better and smarter play.
So why don’t more companies do this? Because by acquiring new customers via advertising, companies have far more control over its marketing messages. This need for control over marketing messages shows that most companies don’t trust their customers to market to other customers. Rock stars completely trust their fans, and empower them to market for their favorite rock stars.
Interaction leads to understand, leads to trust, which leads to advocacy. Rock stars constantly interact with their fans, so they understand them, and trust them. Most companies have little to no interaction with their customers, so they don’t understand them, and don’t trust them.
Your current customers are your best available tool to acquire new customers.
PS: I want to thank everyone who is reading and subscribing and I appreciate all the kind emails as well! Yesterday’s traffic was up 32% versus last Monday, so thank you for your support!
