I recently purchased an accessory for a phone that required assembly instructions. Unfortunately, the English instructions were unintelligible—incorrect grammar, missing words, sentence fragments, etc.
Last month, I received an offer for a credit card—which I already have and regularly use—that was far better than the offer I had originally used to sign up for the credit card.
After subscribing to a newsletter, I am mailed a request to “renew the subscription” monthly. The first request started one month after I paid to subscribe.
For some time, I’ve been struck by the disconnect between the desire to use sophisticated techniques to market to consumers when the basics often seem to be wrong. How can companies of a novel product get the basic instructions wrong? Or communicate to a loyal consumer that they aren’t as valuable as a new customer? Or repetitively bother a new subscriber with requests to renew 11 months before it is time?
Is it possible that all of the emphasis on “newer” marketing—coping with big data, social media, digital, and sophisticated analytics—is preventing marketers from getting the basics right?
To explore this topic further, I talked with Shreesha Ramdas, the CEO of Strikedeck, a Customer Success Automation startup based out of the Silicon Valley.
Whitler: You indicated that you believe that marketers are stepping over loyal customers to prioritize the acquisition of new customers. What makes you believe this is happening?
Ramdas: To better understand this, you have to understand my background. I founded a company that created marketing automation systems. In this capacity, I talked with a lot of B2B firms and saw how demand generation went mainstream and became an important priority for CMOs. However, what I found is that marketers tended to become obsessed with customer acquisition—at the expense of driving loyalty. If you look at CMO profiles on LinkedIn, more than 90% highlight their accomplishments in demand gen and customer acquisition, while few speak about customer loyalty and retention.
Whitler: Why is this happening?
Ramdas: I think it’s happening for four reasons: 1) the number of solutions on the demand gen side outweigh those on the loyalty side (there are a lot of companies emerging that support demand gen, yet fewer that support loyalty), 2) it’s often easier to measure and quantify impact on the lead gen side, 3) this is the status quo and worked just in the pre-SaaS/subscription world, and 4) it is much easier to measure and celebrate new revenue from new customers than revenue saved by reducing churn.
To make this clearer, let me provide a personal example. I was a member of 24 Hour Fitness; for quite some time, I worked out there three times per week. However, because of my schedule, there was a period of several weeks when I stopped going. I never received any notification from the club during this period. Become of time constraints, I decided to start working out at home and so I cancelled my membership. At this point, I started receiving requests to rejoin 24 Hour Fitness. A good system would have noticed that my usage patter (i.e., “loyalty level”) had changed and would have tried to intervene and convince me to get back into the club. Instead, all of their efforts are in customer acquisition. This is one example of how marketers focus on bringing in new customers rather than keeping—or even better—strengthening their loyal customers.
Whitler: Why should marketers prioritize loyal customers more?
Ramdas: There are four reasons:
- These customers can potentially buy more: You can use these customers to purchase more (via upsell, cross-sell).
- These customers are your best referrers: Because these customers are bigger advocates, they are more likely to share their experience. Word of mouth marketing is the best type of social media and referral (see article here).
- Happy customers can be a terrific marketing tool: You can use these individuals as references, testimonials, or case studies. You can use your broad loyalty data (e.g., NPS) to market your superior customer satisfaction levels. There are some companies (e.g., Geico, AppDynamics) that use this information to support a general claim that their customers are happier—something that customers generally aspire to be.
- The cost of retaining a customer is much less than the cost of acquiring a new customer.
Whitler: Is there an example of a company that does a good job of focusing on generating greater loyalty?
Ramdas: Amazon is a great example of how to do this well. They were one of the first to understand their customers’ attributes by customers and then use this insight to help make the shopping experience more efficient and more enjoyable. By the way, they have also perfected using this insight to upsell, cross-sell, and create “sticky” products (e.g., Dash button, recurring orders, Prime, etc.) that enhance customer loyalty through a better experience. Unfortunately, there aren’t many companies that are taking inspiration from this example, especially in the B2B space.
Whitler: What advice would you give to marketers?
- Prioritize advocacy marketing seriously.
- Invest in marketing to your installed base as well as acquisition marketing.
- Create measures to demonstrate the value of the investment. The tools used to measure demand gen tend to be more sophisticated. In other words, the fact that marketers can more easily measure lead gen may be a driver of their prioritization (i.e., marketers invest in what they can measure). To combat this, marketers should work develop effective ROI measures.
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This article was written by Kimberly A. Whitler from Forbes and was legally licensed through the NewsCred publisher network.