70% of companies say it’s cheaper to retain a customer than acquire one – which makes sense since you don’t have to spend time and resources going out and finding a new client. Instead, you only need to keep the ones you have happy. Yet, there are hidden costs associated with both. But how can you spot them? Let’s take a closer look.
Hidden costs are everywhere. It’s easy to pay too much when you think you’re getting a deal; we’ve all fallen for some marketing ploy one time or another. Take BOGO (buy-one-get-one free) – an emerging trend to attract more customers. More often than not, businesses tend to hike up the “everyday” price of the item to compensate for offering the second free. So, the incentive to buy more is not as compelling when you realize the first item is inflated in the first place.
Similarly, consider the money spent attracting customers. Say you own a boutique furniture company. You might be offered a great deal for a print ad in a widely-read glossy urban magazine, at an appealing introductory rate. It could potentially make your new business look not-so-new, and accepted into certain circles, which is tempting. But without a guarantee do you want to risk that cost to attract new customers?
You sell new lines of modern furniture for all ages, but this magazine caters to more established clientele who buy the same brand because their fathers and grandfathers did. It would look prestigious to run that ad, but it’s not such a great deal when you look a little closer, because it’s not targeted at your customer base.
In this age of immediate digital information, you’d be better off attracting new customers with open house events advertised online, and aim for some great Yelp reviews (which are free).
Once your customer base is growing, how do you drive retention without breaking the bank? Customer service is key to customer satisfaction, so weeding out unnecessary leaks such as ineffective, dated software in that department would be a good place to start. Specifically, how efficient is your Customer Communication Management (CCM) platform? The ability to deliver integrated, personalized customer communications is worth the investment. Legacy platforms can slow things down and drain resources – of both time and money.
Things are not always what they seem, but it’s not that tricky to spot the real costs of customer acquisition and retention. Just scrutinize the options and consider the big picture outcome.