Every marketer is focused on how best to grow their brand and the obvious way to do that is to gain new customers. However, such is the focus on customer acquisition, that many forget that there is a complementary way to way to grow a brand: lose less of your existing customers.
By now we should all know that increasing penetration is the most likely way to grow your brand, and, thanks to Double Jeopardy, more customers also makes for more loyal customers. The only problem is that penetration is a leaky bucket; you need to win more customers than you lose if you want to grow.
Most service companies are well-insulated from the sort of churn that afflicts many packaged goods through contracts, switching barriers and switching costs, but by focusing single-mindedly on customer acquisition they sometimes ignore the downsides of customer defections. Corvisa’s third annual Customer Service Report finds that 48 percent of respondents said that they had stopped doing business with a company because of negative customer service experiences in the past year.
Never mind the lost revenue from that customer, lost customers have a hidden negative effect as well. In addition to lost revenues, the brand has incurred the incremental cost of replacing that customer and undermined its chances of further growth. While it is eventually going to be counter-productive to try to retain every customer (not to mention impossible), all you are really trying to do is reduce the probability of losing customers. Fix the obvious issues like long wait times and annoyingly-scripted calls, and make it easy for people to do business with you.
Of course, there is another side effect of a relentless pursuit of new customers; existing customers might come to believe that you do not care about them. By focusing on a strategy of customer-centricity, communication provider O2 in the UK managed to grow its market share, moving from number three brand to number one over the course of five years. O2’s customer-focused strategy was a total contrast to established competitors locked in a short-term, acquisition-led sales battle, but it was successful not only because it helped keep existing customers but because it attracted new ones as well.
There is an adage: a bird in the hand is worth two in the bush. When it comes to growing brands maybe it should read,
‘A bird in the hand means you only have to find one in the bush.’
Written by Nigel Hollis Executive Vice President and Chief Global Analyst at Millward Brown
Source: Millward Brown