Challenging the Culture of Acquisition vs Retention

Posted by Anne Macindoe on 10 December 2014 | 0 Comments

Depending on which ‘expert’ you believe, the cost of acquiring a new customer can be four, six, ten times or more the cost of looking after the customers you’ve got. Whatever the number, one conclusion can be drawn. It is dramatically more expensive to recruit new prospects and convert them into buyers than it is to satisfy, engage and hang onto your current client list. The best way to do that is understand who your customers are and what they want from doing business with you.

Calculating Customer Acquisition Cost

You don’t need to look far to find a formula that establishes the true cost of converting one prospect into a buyer as 20 or 30 times the cost of keeping an existing customer. Actually, professional marketing organisations around the world agree there is no definitive method for calculating the cost of new customer acquisitions. Most temper the reality as somewhere closer to four or six times acquisition versus retention cost, depending on the ratios and formulae used.

The calculations can be daunting. First it is necessary to confront all the terminology – such as CL (Customer Lifetime), MCC (Marketing Campaign Costs), MRR (Monthly Recurring Revenue) and CLV (Customer Lifetime Value). Then components may be applied in both simple and complex CAC (Customer Acquisition Cost) computations. Either way, you will arrive at the undisputed truth. Prospecting and converting new customers is expensive ... much more costly than looking after the ones you have.

Why Customer Retention is so Important

Having said that, cost is just one reason why a customer retention strategy is important. At its heart, retention is about knowing and understanding your customer base. This insight makes it possible to deliver a customer experience that responds to the product needs and service expectations of various customer groupings. Typical results include:

  • Greater Engagement
    loyal customers have more regular contact with favoured products or services;
  • Share of Wallet
    committed customers purchase more often and spend incrementally more;
  • Organic Growth
    satisfied customers are more likely to refer friends/family and share experiences;
  • Positive Return
    rewarding customer encounters significantly boost sales and revenue.

How Origins Deepens Customer Connection

Origins offers a completely unique view of your customer base. One that empowers organisations to connect with the values of its customers, according to their cultural background.

Culture is acknowledged as the overriding factor in how we all approach everyday life. So cultural norms form the basis for how customers respond to messages, interact with brands, process information and make buying decisions. Engaging with those cultural values is an effective strategy to create a resilient, long-term customer bond.

In today’s multicultural Australia, 26% of the population was actually born overseas. In Melbourne and Sydney, more than 40% has strong cultural bonds to a community that identifies with heritage other than Anglo-Celtic. By determining the most likely cultural origin of customers, any businesses can gain important insights about:

  • its customers
  • the make-up of a current customer base viewed by cultural grouping;
  • its penetration
  • the extent to which customers reflect the cultural mix locally, state-wide or nationally;
  • its neighbourhoods
  • the cultural composition of areas in which the business operates.

This cultural interpretation of customer data provides a distinctive opportunity. The chance to build a retention program that engages customers well beyond the product or service level. One that consists of culturally appropriate communications, demonstrating customers are valued and resulting in successfully nurtured enduring relationships.

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