Task: Customer retention is a cost effective and profitable strategy. In fact, research has discovered:
Repeat customers spend 33% more than new customers.
Referrals among repeat customers are 107% greater than non-customers.
It costs six times more to sell something to a prospect than to sell that same thing to a customer.
Given these numbers, wouldn't it seem logical for most companies to spend most of their marketing dollars on customer retention and repeat customers? Yet, that doesn't seem to be the case with many companies. It seems most marketing and sales campaigns are designed for the new customer.
A major pet peeve of mine is wireless telephone companies. New customers who sign a new contract are given a large rebate or even a free cellular telephone; yet current customers whose contracts have not expired have the privilege of paying full price for new phones. This seems like a formula for value migration and is a factor in the intense rivalry between the major players in the industry.
QUESTION:
Q1. Shouldn't we rethink our marketing and sales strategies given the persuasive research that finds it's five times more profitable to spend marketing and advertising dollars to retain current customers than it is to acquire new customers?
Q2. Do you feel it isn't happening as much as it could or should? Why or why not?
Q3. How does your company approach this issue?