Marketers now spend more on retaining than acquiring customers
Guest Blogger | 17 May 2006 | News
Jo Parker, Managing Director of Teamspirit, tells UK Fundraising that this is the year of the consumer, as marketers for the first time spend more overall on retaining customers rather than on acquiring new ones.
2006 is being hailed as the year of the customer. Whilst this may seem a rather fatuous statement, as the customer is always right and should have been central to all marketing in the past, it is intended to highlight the growing importance companies are placing on customer retention. Indeed, recent research confirms what has long been predicted that, for the first time since records began, a larger proportion of marketing budgets is now being spent on retaining existing customers than acquiring new ones.
The report confirms that marketing to existing customers is now exceeding that to new customers. The exact figure quoted is that 53% of marketing budget is now being targeted at existing customers. If this is true, then ipso facto, the acquisition of customers is becoming less of a goal than the retention of them.
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Perhaps, at last, both clients and agencies have come to appreciate the Bain & Co theory that by increasing retention by as little as five per cent profits can increase by as much as ninety five per cent.
One only need look at some of the most recent influential advertising campaigns to understand the change in emphasis. The award winning VCCP campaign for O2 is all about highlighting the benefits of remaining a customer whilst the amusing Nationwide campaign is equally targeted at existing customers.
And charities, too, are beginning to cotton onto the marketing technique. Stephen Maher, of MBA, Marie Curie’s communications agency says: “Much of the advertising work we do is to help support the charity’s marketing to its current donors, be it to try and upgrade the level of donations or create a legacy.”
Tony Clarke, global director of ICLP, the specialist loyalty agency believes that companies, and this includes charities, need to understand better their customers’ behavioural buying patterns and what makes them tick and then respond to them in a personalised and evocative manner. Indeed, we at Teamspirit are seeing a much more significant proportion of the marketing budget going towards communicating with existing customers and giving them the rationale to stay with their original supplier and service provider.
So the retention of customers is becoming increasingly important. For the old leaky bucket model of topping up with new customers to replace lost ones is no longer commercially viable. Media is so fragmented that is it becoming prohibitively expensive to target audiences and the competition in the market place has become fiercer. Charities are being forced to redress the balance by marketing more positively to their current customers.
Paul Canal, managing director of Charity People concurs and says: “We are certainly placing a greater marketing and sales emphasis on ensuring customer loyalty. It is all about adding value.”
Ascertaining the most profitable current and future customers has for a long time been the holy grail. However, with the better harvesting and understanding of customer data it now seems within grasp and thus the ability to communicate to customers in a more personalised way. Clarke of ICLP says: “The 80:20 rule has long been bandied about like confetti at a wedding. But it is now possible to find who your 20% of customers are that deliver 80% of your profit.”
To date too many companies have relied on trying to bring in new customers at the expense of looking after their existing ones. For as long as there has been the ability to put on new customers relatively cheaply many charities did not have to tackle the tougher questions of how to keep existing donors happy. CHASE regularly mails their existing donors, encouraging them to increase their regular gift or just reminding them of the wonderful work that they do. However, the charity recognises that it also has to replenish its donor base and occasionally runs direct mail campaigns to a pre-designated, albeit cold, target audience.
However, marketing budget realignment will only reap the desired rewards if charities are serious about taking an holistic approach to the whole area of retaining donors. And many practices fail to appreciate the importance of customer service in deepening loyalty. The consumer will stay loyal, but only when the suppliers provide an integrated platform of offerings and service that reflects the projected brand image.
To stem the tide companies need to spend more of their budget retaining consumers by developing programmes that produce real insight into behaviour and buying patterns and thus allow for better customer service and reward programmes.
So whilst we applaud the change in emphasis away from chasing one’s tail and constantly trying to acquire new donors – historically to the detriment of existing ones – there is still a long way to go before charities can claim to understand and appreciate loyalty. But, at last, they are trying.
Jo Parker is Managing Director of Teamspirit.
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