Customer Retention: Too Many Missed Opportunities


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THE PROBLEM: Customer attrition rates are increasing and so is the cost of new customer acquisition.

THE SOLUTION: View customers as a precious resource which cannot be squandered. Greater focus on creating Reciprocity of Value-based relationships will generate significant financial returns.

Carol Krol, Editor-in-Chief of Direct Marketing News recently invited me to write an Opinion piece regarding marketer’s prevailing lack of focus on customer retention. For many companies, priorities and budget allocation still focus too heavily on customer acquisition, at the expense of customer retention.

The article below is from the Opinion piece which appeared in Direct Marketing News on June 1st.

I hear many marketers complain about the escalating cost of acquiring customers in our fragmented, distracted media environment. Having paid the price, having invested all that time and effort, and having finally won the business, marketers talk a great deal about the importance of engaging, interacting with and retaining those customers. How well do we walk our talk?

Marketers love to throw around terms like “relationship marketing,” “customer relationship management” and “one-to-one marketing.” It would be nice if large numbers of marketers actually did those things, but the proof that most of us don’t is in how budgets are allocated.

Most companies still allocate significantly greater portions of their budget to customer acquisition than to customer retention. Most sales teams reward “hunters” far more generously than they reward “farmers,” and…the compensation for customer service representatives generally has nothing to do with their critical value in retaining customers.

The lesson we continue to ignore is that it costs far more to win a new customer than to retain an existing customer. This is not exactly new information.

Many years ago, while I was working on a consulting assignment for AT&T, my contact pulled a sheet of paper from a file and handed it to me. It was a carbon copy of an internal study conducted by AT&T which stated that it cost five times more to generate a new customer than it did to sell to a current customer. The memo was written in 1918. Almost 100 years later, the lesson still holds true, except that the cost of acquiring, rather than retaining, is now on the order of 10 times higher.

Yet our metrics, compensation plans and organizational structures are still often driven by the “cult of acquisition.” If we are serious about achieving the goal of true relationship marketing, we have to change how we allocate our budgets. We need to focus more clearly on the financial value of retention and lifetime customer value, and that has to be reflected in our metrics and budget allocation.

The best way to achieve increased customer engagement and retention is to create what I call Reciprocity of Value-based relationships with our customers. These are relationships in which customers trust us to deliver increasingly relevant and personalized online and offline customer experiences, based on the in-depth preferences they opt-in to share with us.

The quality of the information customers choose to share with us during these reciprocal value exchanges is a game-changer from a competitive point of view, but it’s also something more. The presence of that opt-in preference data that consumers have chosen to trust a company with is the best real-world indication of a marketing organization’s willingness to walk its own talk when it comes to true customer engagement.

arrow Create Reciprocity of Value-based relationships with customers. Make increased customer engagement and retention a reality.
arrow Deliver increasingly relevant and personalized online and offline experiences. Define a trusting relationship with your customer, based on the in-depth preferences they opt-in to share with you.
arrow The power of the opt-in, preference driven database you will create will astound you!

Republished with author's permission from original post.

Ernan Roman
Ernan Roman (@ernanroman) is president of ERDM Corp. and author of Voice of the Customer Marketing. He was inducted into the DMA Marketing Hall of Fame due to the results his VoC research-based CX strategies achieve for clients such as IBM, Microsoft, QVC, Gilt and HP. ERDM conducts deep qualitative research to help companies understand how customers articulate their feelings and expectations for high value CX and personalization. Named one of the Top 40 Digital Luminaries and one of the 100 Most Influential People in Business Marketing.


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