Why Is Retention Marketing Imperative For The Growth Of Your Business?
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Marketing is the set of activities involved in promoting brands, including mailbox flyers, website ads, TV commercials, etc. But if we talk about retention marketing, it builds a long-term relationship with the customers. Retention marketing is a new type of marketing that is getting more prevalent in the eCommerce world. The main goal of this type of marketing is to improve user engagement and make them retain your business. Or in short, we can say that strategy focuses on increasing the business’s profitability through repeat purchases.
Most marketers focus only on acquiring new customers using traditional digital marketing techniques and overlook retention. But to survive in the cutting-edge environment, it is imperative to attract new buyers and retain the existing ones. You can increase your ROI by getting your shoppers to shop with you more often.
What is Retention Marketing?
Retention marketing is a type of marketing that focuses on maximizing the value of your existing customers rather than focusing on acquiring new customers. Unlike traditional “acquisition-focused” marketing, the main goal of retention marketing is not to acquire more customers.
But the main goal is to encourage repeat purchases from existing buyers.
- For subscription services, retention marketing is implemented by encouraging users to activate their existing plans and motivating them to upgrade to a more advanced plan.
- For eCommerce, retention marketing is implemented by encouraging your shoppers to make repeat purchases from your app or website.
Retention marketing strategies can be implemented on existing customers or the customers who require re-activation.
Why retention Marketing is imperative for your business?
Retention marketing is essential because retaining customers is easier and more cost-efficient than acquiring new customers.
Consumer acquisition costs have increased around 50% for both B2C and B2B businesses over the last 5 years.
Here is why is it vital to comprehend
If you are spending $600 in acquiring new customers, your customers churn after giving you a return of only $300. This shows that you are focusing on acquiring new customers but don’t have an effective strategy for retention, which will take your business to the loss at a very rapid speed.
Adobe’s CEO Shantanu Narayen says in an AdNews interview in March 2019 that numerous brands are chasing customer acquisition when the actual value lies in understanding what high-value actions are and in driving product usage.
Retention is simple and cost-efficient
Cost and efforts invested in retention are much lower than acquisition. As per a research report by Harvard business review acquiring new customers is 5-25x costlier than retaining the existing customers. Existing consumers are well aware of your value proposition, so there is no need to waste time in targeting them with a full advertising pitch.
Also, establishing healthy relationships with the customers increases the 60-70% probability of selling items to the existing consumers.
Read Also: What are the top Ways to Improve App Engagement & User Retention?
The cost invested in retention is much more effective than the cost invested in acquisition.
A report from price intelligently reveals that improving retention by just 1% is 2-4x more effective than improving acquisition by 1%. So this shows that you will receive a higher ROI when you invest a more significant portion of your investment in retaining your editing customers.
Retention Increase profits
As discussed in this article, retaining an existing customer is much cheaper and more cost-efficient than acquiring new customers. A 5% increase in user retention can increase 25-95% profitability.
What Is A Good App Retention Rate?
Good app retention relies on the user base, business model, and industry type. For some sectors, retention is about purchases or one-off visits. Whereas for others, it may be recurring subscriptions. In E-Commerce, 33% is considered a good retention rate.
The general formula for app retention is –
(No. of users at end of the period – No. of users acquired during the period) / No. of users at the start of period) x 100 = retention rate For example, if you have 160 users at the end of time, 134 at the start of the period, and 25 new users. Then, your equation will look like ((160-35)/134)x100= 93.2% will be the app retention rate.
Crucial Stats For User Retention And Acquisition
- Raising user retention by 5% can increase 25 to 95 percent profitability.
- Acquiring new customers can cost up to 5x more than retaining existing customers.
- The success rate of selling to an existing customer is 60 to 70 percent while selling to a new customer is 5 to 20 percent.
- Research from American Express reveals that about 33% of shoppers will consider switching brands after just a single poor experience.
- Another research shows that organizations in the US lose around $136.8 billion yearly due to customer switching.
From the above stats, it is clear that it is essential to focus on your existing customers, as losing existing customers can give you a significant loss. So focusing only on customer acquisition will act like a leaky bucket theory where your customers enter from one door and leave with the same speed.
Acquisition Marketing Vs. Retention Marketing
Acquisition or marketing – which one is important for growth?
Actually, both are essential factors for growth and sustainability in their way. However, most businesses put most of their efforts and resources on the acquisition part and often work or completely overlook retention. But in reality, retention marketing offers more ROI and is much more cost-effective than acquisition marketing.
Customer Acquisition
Customer acquisition is the process of acquiring new users. This involves attracting new customers to the business and enticing them to purchase the product or service. Then after acquisition comes the retention part, where you try to retain customers you gained through the acquisition.
The acquisition helps In the growth of the Customer base
It is evident that no business runs without users. Also, there must be some customer base to work on the retention part. So the primary function of customer acquisition is to acquire more and more new customers. Marketers use different ways to attract new customers.
Retention helps in the Growth of Customer Lifetime Value(CLV)
Retention helps build good relationships with customers and repeatedly makes customers purchase from the business. It involves techniques and processes that help build the brand’s goodwill and turn customers into loyal customers. And loyal customers are the ones who blindly trust a specific brand they are using.
So both customer acquisition and retention marketing strategies are imperative for business growth.
In A Nutshell
To survive and thrive in the market, acquiring customers is insufficient, but it is also imperative to retain your customers. Both approaches are essential for the growth of any business. Once you acquire customers, you should put more effort and resources into retaining your customers. As retaining customers is 5-25x less expensive than acquiring new customers. Customers are retained with an enhanced user experience. To enhance your user experience with a fast and fascinating mobile app.