Forbes Insights and Sailthru recently completed a global study of 300 retail and media executives to find out if, and how, they take advantage of the benefits of retention strategies and how that impacts growth and performance. It has been well documented, says the report, that it is much more cost-effective to focus on nurturing relationships with existing customers than it is to find and convert new ones. Edited and presented mostly verbatim, the survey 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, says the report.
Definitions for Retention Gurus and Acquisition Athletes are detailed, with a breakout of vertical and geographic data for each segment.
The report analyzes companies that excel at retention, (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.
Being a Retention Guru comes with benefits. More Retention Gurus significantly increased market share over the last year (14%) as compared to Acquisition Athletes (5%). Of the total sample, says the report, most of the executives surveyed feel they are doing an outstanding job of acquiring new customers, as only 3 in 10 companies believe they are exceeding expectations for retention, while 8 in 10 believe they are exceeding expectations when it comes to acquisition goals.
Projected long-term profitability growth, despite being the foundation of survival for companies, did not break into the top five influences on customer strategy decisions for either segment, says the report. Notably, however, Retention Gurus are much more aware of the importance of this (40%) than their Acquisition Athlete colleagues (26%).
Retention Vs. Acquisition Considered When Making Decisions About Customer Strategy As It Relates To Growth (% of Respondents)
Insights from data and analytics
Inertia—we do it the way it has always been done
What we consider to be the industry standard/benchmarking
Experience of executive team
Projected long-term revenue growth
Projected long-term profitability growth
Projected short-term revenue growth
Projected short-term profitability growth
Source: Forbes, November 2016
One indication of the importance of retention and acquisition to customer strategy lies in how companies allocate their marketing budgets. Most companies spend almost equally between retention and acquisition, and over the past one to three years, this allocation has remained unchanged or only slightly increased. Whether this change is caused by inertia or having a better handle on spending for retention, the vast majority of budget increases were on the acquisition side—four out of five companies increased here, whereas only two in five increased retention budgets.
The Top Two Barriers To Investing More In Customer Retention
Inability to measure ROI of retention tactics (other than technology)
Company’s business model or strategy focuses on acquisition over retention
Lack of understanding/buy-in from executives, the board of directors and/or shareholders
Lack of expertise on the marketing team
Lack of budget
Organizational structure does not support it
Source: Forbes, November 2016
Concluding, the report says… “Given that retention-focused companies show greater increases in market share than their acquisition-focused colleagues, and given that retention-focused companies over perform in both retention and acquisition, it is critical to evaluate your current customer strategies”:
The study and report are COPYRIGHTED © 2016 Forbes Insights, and based on a survey of 300 retail and media and publishing executives conducted in March/April 2016 by Forbes Insights.