Monday, November 7, 2016

Retentionomics: Why Lasting Relationships With Customers Make Sense




It has been well documented that it is much more cost-effective to focus on nurturing relationships with existing customers than it is to find and convert new ones.

Forbes Insights and Sailthru recently published a report “Retentionomics: The Path to Profitable Growth” based on a global study of 300 retail and media executives designed to find out if, and how, they take advantage of the benefits of retention strategies and how that impacts growth and performance.

The report reveals that while the benefits of retention are widely known, companies significantly underutilize them and routinely fail to make a strong connection between retention and its impact on revenue. In short, there is tremendous room for advancement for all companies—to work smarter, not harder.

The report analyzes companies that excel at retention, or Retention Gurus, which were 14% of the sample, and those that focus on acquisition, or Acquisition Athletes (14%). The remaining 72% of respondents did not skew their budget allocations toward either acquisition or retention, and/or have not experienced the same success with their customer acquisition and retention goals.

The report also delves into the reasons why most companies still struggle to take advantage of retention’s benefits, the results this state of affairs can lead to, and key strategies to correct it.

Here are the top findings:

Focusing on retention pays off. More Retention Gurus significantly increased market share over the last year (14%) compared to Acquisition Athletes (5%).

Retention Gurus scored better in terms of customer churn. Forty-five percent of gurus did not have increases
in churn over the last year, compared to just 33% of Acquisition Athletes. In addition, 88% of Retention Gurus are exceeding their customer acquisition goals.

Inertia is what keeps most companies from becoming Retention Gurus. For most companies surveyed, the primary factor in making decisions about retaining and acquiring customers is inertia—84% of Acquisition Athletes report doing things “the way they have always been done” when defining customer strategy, compared to just 63% of Retention Gurus.

Companies have not shown signs of trying to break this inertia by investing more in retention.Seventy-nine percent of acquisition budgets increased over the last year compared to just 42% of retention budgets. Half of all Acquisition Athletes made no change to their retention budget.

Taking full advantage of customer retention strategies requires rethinking budget allocations,and investing more in technologies that can help companies better achieve and measure retention goals. Currently, 37% of Retention Gurus and 35% of Acquisition 
Athletes cite technology limitations as a barrier.

Retention Gurus know they need to allocate more of their budget to retention. Lack of budget is a bigger barrier to measuring retention rates for them (23%) than it is for Acquisition Athletes (7%).



Source: www.forbes.com


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