Customer Retention Strategies
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Customer retention is a cost effective and profitable strategy. In fact, research has discovered:
Repeat customers spend 33% more than new customers.
Referrals among repeat customers are 107% greater than non-customers.
It costs six times more to sell something to a prospect than to sell that same thing to a customer.
Given these numbers, wouldn't it seem logical for most companies to spend most of their marketing dollars on customer retention and repeat customers? Yet, that doesn't seem to be the case with many companies. It seems most marketing and sales campaigns are designed for the new customer.
A major pet peeve of mine is wireless telephone companies. New customers who sign a new contract are given a large rebate or even a free cellular telephone; yet current customers whose contracts have not expired have the privilege of paying full price for new phones. This seems like a formula for value migration and is a factor in the intense rivalry between the major players in the industry.
QUESTION:
Shouldn't we rethink our marketing and sales strategies given the persuasive research that finds it's five times more profitable to spend marketing and advertising dollars to retain current customers than it is to acquire new customers?
Do you feel it isn't happening as much as it could or should? Why or why not?
How does your company approach this issue?
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Solution Summary
827 words looks into how far companies will go to attract repeat customers, using a cell phone company example.
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Here is a thing that you need to consider - how are repeat customers fostered? By being attracted to new companies and getting a good rebate. These people who will be truly satisfied with the new products are more likely to become loyal customers.
Let's start from the beginning:
Customer A signs up for a cell phone. There is dozens of choices out there. Which provider should they go with? Which cell phone? Which plan?
Due to this intense competition, cell phone companies actually have to spend a substantial amount of money attracting these customers to them. They need to have good promotions on the phones, economical plans..
Without these expensive incentives customers will migrate to the place where they could get the best deal.
Now these people are locked into a cell phone plan. They are set for the next 1 or 2 or 3 or even 4 years. Their contract carries huge penalties if they were to cancel. While in a contract, the company does not have to worry about attrition.
Once their contract is over, IF they were SATISFIED with the price and the quality of service, it will be a no-brainer for these customers. They will most likely continue on and resign a new contract.
This has ...
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