Marketers balance customer acquisition and retention as economic recovery nears


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The latest study by customer insight and database marketing specialist KDB found that, while marketing decision makers in the UK channelled spend into customer retention during the recession, with the economy on its way to recovery the focus is shifting to a more even balance between prospecting for new customers and seeking to retain existing ones.

KDB found that more companies are returning to balanced marketing spend now that the economy is turning around. At the height of the recession, 22% of the 500 marketing decision makers surveyed said their firms were spending more of their marketing budgets on customer retention than acquisition while just 8% were focused on prospecting for new business – although 52% said their companies maintained an even balance between the two.

With the economic outlook improving, however, the firms focused on customer retention were shifting spend back to customer acquisition. The survey showed that, with the economy improving, only 9% of companies planned to remain focused on keeping existing customers while the percentage maintaining a balance between retention and acquisition has increased to 62%. The difference resulted from marketing managers shifting extra expenditure away from retention activities, as the focus on nurturing customer relationships decreased from 22% mid-recession to 9% post-recession.

A sector-by-sector analysis shows that all industries are moving towards a more balanced marketing budget with the exception of the media and marketing segment, which instead boosted its spend on prospecting, with 14% of marketing decision makers surveyed saying they were bolstering customer acquisition budgets as the economic outlook has improved. Out of all the sectors studied, the banking industry exhibited the most balanced approach to marketing spend, with 82% of firms aiming for balanced marketing spend now that the UK appears to be coming out of recession. The Hospitality sector, on the other hand, is far more concerned with nurturing existing customer relationships, as 17% of finance directors are still emphasising retention over even marketing expenditure – the highest percentage out of the industries studied.

Matt Boot, chief analyst, KDB, comments: “Customer prospecting is clearly a major focus of post-recession marketing, and firms failing to shift budget from retention back into finding new business as the economy emerges from recession will be left behind. While firms did well during the recession to nurture their existing customer relationships in order to prevent mass defection, it is essential that businesses seize the post-recession window of opportunity to seek out new business.

“Those that leaned heavily toward retaining existing business during the downturn now need to be taking a more balanced approach. We have found that many firms are in fact taking this sensible line and shifting budget from customer retention into prospecting – a trend which stands as a further sign that firms lagging behind in updating their marketing strategies might very well find themselves losing ground as the economy continues to improve.”

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About KDB
KDB is a data and database marketing consultancy whose services include analysis for campaigns, insight into customer patterns and behaviour, database hosting, and campaign management. KDB is retained by household name organisations in the retail, financial services, travel and utilities sectors.

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