I was astonished recently to be phoned and offered a "New-Customer Only Deal" by an electricity retailer ... my existing electricity company...
Then, to be advised (by my caller) that I was “not eligible for this low-rate discount” due to my current ‘Relationship’ (yes, they even used the ‘R’ word to reject me)…
Overlooking the obvious
This is an all-to-common phenomenon: companies spend an inordinate amount on advertising, promotion and ‘customer win-back campaigns’, at the expense of their existing (goldmine of) customers. They are like a goldminer abandoning an existing seam of gold to spend all their effort prospecting…
Are you '$0 to budget' each month, or 25-60% out of the blocks?
Most businesses have wonderfully rich databases of existing customers. As owners/employees we can grind away month-after-month chasing and discounting each next sale, clawing ourselves from $0 to budget every month or start each month with 25-60% of sales already on the board from our retained clients.
Acquisition, or Retention?
Yet, where the cost of acquiring a customer far outweighs the cost of retaining one, it is mind-boggling the lack of effort many companies (and their personnel) exert to retain customers. Especially given the value of a returning customer (plus their referrals!) is greater than that of new customer, and the investment in retention is miniscule compared to the cost of acquisition.
When energy and priority is placed on Customer Retention a multiplier-effect produces an ROI reflected in budget-achievement, revenue, staff retention and profit.
80% Retention / 20% Acquisition
Of course, for a variety of reasons no business can retain 100% of customers and new customers have to be added to the ‘top of the funnel’ each month. But, as I’m sure you agree, it is simply mystifying how so many businesses ignore their ‘pot of gold’ each month and search only for new ‘tenements’.
Mining or Prospecting…
Which brings me back to mining or prospecting… Perhaps only a small nugget to them, being out-of-contract and taken for granted, we left that retailer (ironically, with gold-coloured branding) for another – who promised to be ‘different.’
I guess we will see...
By Mike Johnston