Loyalty Marketing — The Argument for Customer Retention
When you find a good Career Coach, you stop looking. Not because you found the best coach in the world, but because your need is resolved. You disarm the search reflex for as long as the need is fulfilled and you are happy with the experience.
The last part is key for those of us who want our customers to stick around for longer.
As growing brands, we are all trying to figure out the sweet spot between acquisition and retention, and the ratio is different for each of us.
This blog will help you better understand the difference between acquisition and retention, build a compelling argument on the latter, and clear some common misconceptions we often see in the wild.
Here’s a Rundown in a Minute or Less
A lot of retention work boils down to good work ethics and a customer-centric business approach.
The balance between acquisition and retention is highly contextual, and each brand must find their own sweet spot. While retention is less glamorous, it is equally important, especially when times start to get rough.
Know your people, reduce all friction points, and invest in CX to make their experience as close to seamless as you can.
Comparing Acquisition to Retention
Customer acquisition is the process of attracting new customers, and where most of your sales and marketing efforts will go.
It’s where most brands direct their marketing focus and where the majority of time and resources are spent.
Growing your social media following, getting website traffic, more email subscribers, you get the point.
Retention, on the other hand, is about building a relationship with your existing base so they become repeat buyers, and ultimately loyal brand advocates.
As we’ll see below, this one is a bit more nuanced, as it relies on the nature of your business, industry, and other factors.
In short, one helps you grow, while the other makes it sustainable. Most of us invest in both.
Here’s a quick look side by side:
The Argument for Retention
For many brands, customer retention is like the mystery Tupperware you open when hope fades. When all the stuff you like to eat is gone, you start looking at what’s been in the fridge this entire time.
It’s not glamorous work. If anything, it’s more work and certainly less exciting to talk about during meetings with leadership. But it is necessary work—and it’s best done when times are good, so it doesn’t hurt as bad when things get rough.
You do it because:
It costs 5 to 7 times more to acquire a new client than it does to retain one. This is the number one argument you’ll hear for retention and for good reason! Source:
Repeat buyers are better buyers. The same Bain & Company showed that increasing retention by 5% can boost profits by as much as 95%.
Happy customers are more likely to become advocates. There’s no marketing as timeless and efficient as word of mouth. Retention fuels organic growth through trust and referrals.
In Marketing, retention starts to gain more traction when times get rough, and at that point, it might be too late.
What we argue in this article is not to redirect funds and energy from your acquisition efforts, but rather to look at your work through a retention lens and incorporate those ideas into every aspect of your business.
Most times, that just means having a customer-centric approach to your work:
Removing every friction point from your customer journeys to make the experience as seamless as possible.
Personalized marketing efforts
A unified brand identity that everyone in the organization gets
The last one is critical, especially in B2B. As prospects, we can tell when the culture in an organization is the real deal and not some wishful thinking from HR.
There is consistency in what you hear from every department; your needs are anticipated, and the entire experience flows better.
Almost like sales and marketing actually working together or some other crazy stuff!
Personalization is also essential to retention. Here are some McKinsey stats to prove our point:
76% of consumers are more likely to purchase from brands that personalize
78% of consumers are more likely to repurchase from brands that personalize
78% of consumers are more likely to refer friends and family to brands that personalize
The Psychology of Retention
As humans, we are wired to seek consistency. In our line of work, this concept is known as Cognitive Consistency, or:
“The alignment between a brand's messaging, product offerings, and customer expectations, aiming to reduce dissonance and build trust.”
Cognitive Consistency is a psychological principle that suggests we are motivated to maintain harmony between beliefs and behaviors. That’s why value alignment is so important in marketing.
When something disrupts that harmony (what we call Cognitive Dissonance), it creates tension that triggers us to either rationalize the action to restore consistency (customer loyalty) or resolve the discomfort by leaving (customer churn).
If your favorite subscription-based service stopped doing autopay, would you still use it?
A consumer who learns about Nestle’s child slave labor practices or their baby food scandal—no, not the baby formula one— will try to justify it as “mmm candy is yummy” (loyalty) or stop purchasing Nestle products altogether (churn).
The speed at which this customer churn occurs is fast.
For B2C products and services, especially in lower-cost categories, the reaction is often immediate. Think about how quickly you’ve considered switching food delivery apps after one bad experience—or how fast you stopped going to a coffee shop that got your order wrong two days in a row.
There is little tolerance for friction (any obstacle or inconvenience when interacting with a brand), and customers will easily jump ship.
In B2B, the movement is slower but more deliberate. There will be a lack of engagement, fewer logins, or even delayed renewals.
And when a better solution appears, the axe will fall swiftly.
Consistency matters
Most brands lose repeat customers through silence, not failure.
When Should You Start Thinking About Retention
Right now. Even if you are a brand-new business, approaching your work with a retention mindset will make everything much easier in the long run.
It is worth noting that the dynamic between acquisition and retention is contextual and relies on your industry, target audience, and business maturity. Nevertheless, a general overview would cover most cases.
New business
Your primary goal is to build brand visibility and acquire your first customers. You’ll invest heavily in lead generation, processes, and finding your place in a highly competitive industry.
Perform surveys and interviews on your first clients, gather website data, and test your current processes to remove any potential friction points that your new customers may experience.
For many, a seamless experience is the key driver for retention, so strive to be as close to flawless as possible. Build a habit of quality and have others test your customer journeys.
Growth-stage business
Be proactive and win while you’re ahead.
By now, you’ve learned to balance acquisition and retention efforts to find your investment sweet spot, in terms of both time and money.
That means:
Solid post-purchase nurture sequence
Engaging content and educational resources
Tracking churn and investing in CX services
Matured business
Outsource.
No joke. If you’re at the point where time is more valuable than money, don’t even think twice. Speak with your Marketing Lead and pay other people to do this for you.
Better yet, go to our Contact form and start now.
What most brands get wrong about retention
Retention begins before the initial sale
Too many brands treat customer retention as an afterthought. Once the sale is made, we transfer our clients into a different part of our CRM where they’ll receive semi-relevant emails to stay top of mind.
Treat retention as a culture. Every touch point is an opportunity to build value and trust. By the time the sale is made, you’ll be way ahead of the game.
Transactional loyalty
Many loyalty programs are just bribes disguised as retention tactics. Supermarkets and other D2C brands are guilty of this practice with reward points that expire, discount tiers based on how much you purchase, and other urgency-inducing tactics.
Customer churn as a symptom
Seeing churn as the problem is like taking an ibuprofen to ease the pain after you’ve been hit by a bus. Is the bus your problem, or the fact that you kept walking into oncoming traffic?
Looking at what causes customer churn is the first step in reducing it, CX can help you get to the bottom of that.
Where does the funnel pour?
Sales funnels are a linear practice where people enter as prospects and leave as customers. Where do they go after their needs are met?
There’s no better example to expand on this idea than HubSpot.
Even as a free user, you get access to a massive learning ecosystem where you are constantly learning valuable skills and how to best apply them with their product.
It works well enough that they reimagined the sales funnel as a flywheel, where existing customers stay in the loop through upgrades, cross-buys, advocacy, etc.
The wheel keeps turning.
Speaking to your biggest fans
This article is part of an Evergreen Content Package
A series of blogs, emails, and social media posts that will stand the test of time to tell your people what you stand for.
Strategies for Retention
Half of the retention work is to not be a shitty company. Make it a constant practice to reduce friction, stay consistent with your outreach and CRM work, and don’t go back on your word.
Breaking a promise or going against a value can cost you a lot more than you think.
Stay proactively connected
Most brands lose repeat customers through silence, not failure.
There is a lot of competition for attention in the digital space, and as soon as you lose your seat, it’s hard for them to come back.
Consistency and value are key in this connection, and incorporate retention as a metric in your content marketing strategy.
Gozney is one of our favorite examples of this principle.
They produce pizza ovens. Naturally, you’d assume they share recipes, talk about specs, and the usual stuff, which they do.
What makes them stand out is their involvement with the entire experience as the owner of their product.
They created an online academy for all things pizza where they can learn the entire process, even partnering with Richard Bertinet, a leading global authority in all things dough.
They have a growing list of brand ambassadors who can nurture their presence with current and new customers.
They’re investing in local events and pizza classes to really up your game with hands-on experience.
This approach does three things right:
It anticipates customer needs before they even voice them
It reaches out with context and relevance to build community
It views ownership of their product as relational, not transactional
A unified brand culture
People expect consistency. That means your messaging is consistent with their expectations at every touch point with your brand.
Brand messaging is something everyone should be very clear on, from the CEO to the receptionist of an organization.
Whatever claims from marketing must be entirely validated by sales. Whatever your sales reps say must be entirely validated by customer service.
CX is the Retention Tool Nobody Talks About
Customer Experience is the glue between brands and customers that nobody is talking about.
CX is the sum of all interactions a customer has with a brand across their entire journey — from awareness to post-purchase — along with the emotions, perceptions, and impressions those interactions create.
In short, CX defines every moment that shapes how customers feel about your brand.
For the longest time, it has been seen as a large organization tactic, but it is safe to say everyone can benefit from it, from professionals to multi-corporations.
The US Customer Experience (CX) market is predicted to reach nearly $5bn this year.
We might expand more on this topic, so let us know if it’s something you value.
A great customer experience signs the deal
Consistency is what turns it into loyalty
Ideas From Us
So much of it distills down to trust and convenience.
Especially in the B2B space, we want a need fulfilled so we can move on with bigger priorities. If you build trust and ensure a seamless experience, most of your work is done.
Earn some extra points in the delight phase, and it’s smooth sailing for the most part. For THE MOST part.
If times are rough, invest in customer retention to compensate for the decrease in new customers.
If times are great, invest even more in retention so you don’t have to worry about rough times when they come.