The Value of an Existing Customer

The Value of an Existing Customer 1 In a perfect world, it's both and everything in between. In the real world the general marketing rule is that retention is a lot more cost effective than acquisition. Carrie Johnson, Forrester Research On which is more important: keeping existing clients thrilled or wooing new consumers. Customer Retention vs. Customer Acquisition 6.7 50% 5.95% to number of times more costly it is to acquire a new customer than retain an existing one amount of increased profits that can come from boosting customer retention rates by as little as 5 percent amount customer attrition rates could reach if left dor- mant over a 5 year period Source: http://www.businessfastaward.com/small-business-marketing-strategies-customer-retention-vs-customer-acquisition/(Frederick Reichheid of Bain & Company) Costs Associated with Finding New Customers Steps to Take to Increase Profit New Customer Costs Steps to Increase Profit and Save On Existing Customers - Cost of advertising/promotion Price sensitivity - Personal selling 1 Reducing the frequency of advertising and volume of promotions, such as free gifts, discounts, and sponsorships, will save on these costly activities. Setting up new accounts - Time and money in explaining business to new customers - Cost associated with the inefficient dealing with new customers Reducing personal selling budgets allows a business to save on the commission for sales persons. 3 Reducing the amount of new customer accounts saves on setting up accounts and reduces the entertainment budget for customers. Profits Generated from Satisfied Customers + Reduced price sensitivity + Reduced switching to competitors Reducing time and money on explaining business procedures and costs with new customers will + Increased referrals * Increased repeat purchased save overall. How Loyal Customers Give a Business a Competitive Edge Because existing customers are less price sensi- tive revenues increase by charging the premium to loyal customers. Source http://www.koellay.com/2009/0wwhy-recruiting newcustomers is more htm! The answers given by 300 marketing leaders of various large companies show the importance of existing loyal customers to the success of a company: Which of the following results are integral to your definition of successful customer engagement? Most Important Marketing Objectives, According To U.S. Marketers Repeat purchase behavior Customers become brand advocates who market on your behalf Customer willingness to pay a premium Taking customers away from competitors 7% Customer resistance to competitive products and services Creating awareness for long-term brand building 15.4% 29.9% Customer acquisition Customer support for the brand reduces marketing and sales costs Customers volunteer time and talent to improve brand's products and services 21.3% Lead generation to support sales 26.6% Customer retention How can the CMO/marketing function best encourage customer engagement? The Primary Marketing Goal of U.S. B2B Marketers in 2009 10 20 30 35 By taking a leadership role to ensure authentic, consistent brand experience Other By creating campaigns based on customer interaction, not observation Brand awareness 12.4% By creating systems that involve customers in the product development cycle By designing tools and assets that brand advocates can use to evangelize By increasing employee education and training to create rich brand experiences Customer retention 20.6% 62.2% Customer acquisition By designing "big idea" market- ing campaigns to express brand value Flowtown. Source http//www.emarketer.com/Article aspxR-1007079 Source: http/images forbes com/forbesinsights/StudyPOFs/GP! Ruies of Engazement pdf