Arbron Media Associates

Customer Retention is the Key to Profitability

Customer retention has traditionally ranked low as a business priority: as recently as 2012, marketers ranked “driving sales” as their highest concern while “engaging customers” and “building customer loyalty” tied for last place.

However, Retention Marketing efforts have recently gained more traction. Consumers today have short attention spans and an excess of options, and marketers have had to adjust accordingly.


This trend is beneficial: according to a study by Bain & Company, increasing customer retention rates by just 5% increases profits by 25% to 95%. What’s more, 82% of companies agree that retention is cheaper to execute than acquisition, according to an eConsultancy report released last month.


For long-term success, companies must commit to a new way of thinking that must be implemented from the top down. This commitment can be broken down into three components:


1. Redefine How Customer Value is Measured.

Successful marketing campaigns have high, measurable return on investment (ROI). Acquisition results are easy to measure – sales versus spend – which means a fast, easily visible ROI. Marketing campaigns are then built around driving those numbers at all costs, often by adding discounts and other tactics that eat away at profit margins.

Customers are clearly willing to invest with brands that provide value to them. To create a loyal customer base, companies must invest in their customers, too, beginning with redefining how they measure customer value.

2. Understand and Champion the Need for Data-Driven Technology.

The key to keeping customers engaged, thereby increasing their lifetime value, boils down to an individually tailored customer experience. Providing tailored offers and messaging elevates the customer’s entire shopping experience, which translates into goodwill toward your brand. A decade ago, this level of personalization on a large scale was impossible, but today companies have the technology to accomplish true one-to-one communication with millions of customers.

The longer you are able to retain customers, the easier it is for you to understand and service them. This fosters brand loyalty in the long term.

3. Execute a “Hard Reset” and Restructure from the Top Down.

If the previous components are changes in perspective, the final step is acting on those changes. Companies must execute a “hard reset” on how they define business profitability: Retention Marketing should be on par with, if not ranked above, acquisition efforts.

Proper execution of this reset requires change from the top down. Customer retention must be established as a company-level and CEO-level goal. 50% of the marketing budget should be allocated to retention; at the very least, a separate budget should be created with the purpose of driving customer retention.

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