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 “… 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.

Do you?

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Selling Managed Services: Getting Inside Your Customer’s Mind

Successful selling requires an understanding of the buyer’s mind, and most MSPs fail to develop a clear understanding of their customer’s true needs. Specifically, many MSPs don’t understand why buyers do — or don’t — buy from them. Great businesses take the time to understand their buyer’s psyche. Let’s delve a little deeper.

First, there’s the psychology of buying. People buy based on emotion rather than logic — even large corporations. Why do we all yearn for BMW 7 Series when a Honda Civic gets us from point A to point B just as well and for a lot less? Spending $90,000 on a car defies all logic and reason when you think about it. Here’s why we do it.

Maslow’s Hierarchy of Needs:

Remember Maslow’s Hierarchy of Needs from psych 101? Well, it applies to sales, too. We want the BMW because it tickles the desires at the top of Maslow’s pyramid. Driving a nice car makes us feel important, like we have achieved greatness. It earns the respect of our clients and friends. These needs trump the basic transportation needs at the bottom of the pyramid.

The BMW Hierarchy of Needs:

  • Physiological Needs: We need transportation.
  • Safety Needs: A car allows us to work and earn income to support our family.
  • Belonging Needs: Having a nice car like the people we aspire to be means we belong.
  • Esteem Needs: A luxury car earns respect and adoration.
  • Self-Actualization Needs: A luxury car gives us the edge we need to be successful.

The MSP Hierarchy of Needs:

  • Physiological Needs: My business needs a computer network to function.
  • Safety Needs: My business needs a safe and secure IT infrastructure.
  • Belonging Needs: Good businesses use technology effectively and have competent IT departments. So should mine.
  • Esteem Needs: Being a successful technology leader in business will make our company the envy of employees, customers, and competitors.
  • Self-Actualization Needs: Effectively leveraging technology will allow me to build a more profitable and successful company.

The Seller’s Mistake:

Here is where most people falter. They sell from the bottom of the pyramid up, rather than from the top down. We tend drill in on the technological (“physiological” and “safety”) needs rather than higher level business concepts. We’re going to keep your equipment running, backup your data, patch your servers, and so on. Blah, that’s boring. These are important aspects of what we do, but they don’t inspire CEOs to pay top dollar for managed services.

The Right Way to Sell:

Selling from the top of the pyramid down excites people. No CEO gets hot and bothered by patch management. Instead, focus on high level concepts. Show them how they can better use technology to increase sales, keep their employees productive, and reach their ultimate business goals. Demonstrate how their competitors are using technology more effectively than they are. Making more money and achieving success excites CEOs. Work from the top down. Show them how you can enable their business to be great.

Paul Barnett is VP and COO at Network Depot, the MSP that launched Virtual Administrator. Monthly guest blogs such as this one are part of MSPmentor’s annual platinum sponsorship. Read all of Barnett’s guest blogs here.

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Make the Right Choice in an Online Backup Software Vendor

Since RBS started the Online Backup industry in 1987 many other companies have come and gone, most of them attempting to follow in our footsteps. Over the past 24 years many of these “me-too” companies have based their software on the basic protocol that we invented. The basic process is simple and has few variants. […]

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