Is Customer Retention Really Marketing’s Lowest Priority?
We took a closer look at two recent reports highlighting how sales and marketing priorities and budgets are allocated in 2011. The good news is, according to CSO’s 2011 Lead Management Study, marketing budgets are on the rise. CMO Council’s The 2011 State of Marketing Report also confirms this, with 57% percent of respondents indicating that they are adding to their 2011 marketing spend. (Note that this represents a budget between 2 and 4 percent of revenue.)
So how are we spending all this money?
In CSO’s Lead Management Study, respondents reported their top three strategic marketing objectives this year as:
- Increasing new customer acquisition – 82.6%
- Optimizing cross-selling and up-selling – 41.7%
- Increasing brand awareness – 41.5%
However the real story is in the bottom three:
- Increasing customer renewals – 17.6%
- Enhancing customer experience – 16.3%
- Becoming customer-centric – 14.5%
CMO Council’s data also weighs in on our apparent lack of focus on our existing customers. Their State of 2011 Marketing report indicates that only 4% of marketers are concerned with customer churn when allocating their budget. CMO says “â€¦ marketers continue their focus on more costly customer acquisition strategies in place of customer retention initiatives.”
It’s been said before: it is far cheaper to keep a customer than to acquire a new one. So why is customer retention falling behind?
If we take a closer look at the data, we find that marketers are facing some big challenges this year:
- A lengthening sales cycle. Marketers now own more of the customer as sales cycles slow down and prospects spend more time on the web, learning and comparing on their own, before engaging with sales.
- Overwhelming amounts of customer data. Many more of us jumped on the social media bandwagon this year, afraid of being left behind and without having an integrated solution in place. Now, we have lots of customer data all over the place, and we aren’t sure what to do with it (or how to get at it.)
- Lack of talent. CMO Council reports that 37% of marketers plan to bring on new digital and interactive marketing talent this year. We’re not surprised. In 2011, marketers found themselves with Facebook pages, Twitter accounts, even going mobile, and did not have a well-thought out strategy for any of it.
What is being lost as we fight our way through these challenges? The opportunities to build loyalty, increase revenues, and promote brand equity through our most precious resource: our customers.
Determining what priority customer retention should take in your marketing strategy starts by understanding the lifetime value of your customers. If you’re not sure where to start, check out our Customer Value Pack. It is designed to calculate the core value of your best customers and help you more effectively define, acquire, and retain the ideal customer set within a reasonable budget.
Knowing the numbers allows marketers to prioritize customer acquisition and retention strategies with more precision and authority. Because of this, we believe that all marketers must understand how much they can truly afford to spend to acquire a new customer.