Tuesday, 24 June 2014

Billy's Twenty-Sixth Law: Never let prospecting campaign affect customer retention.

Sorry, but the ice cream is only for our new friends.
Ally Bank Advertisemen

There are two types of marketing and promotional strategies.  Strategies designed to attract new customers are called prospecting or acquisition strategies.  Strategies designed to keep your existing customers are called retention strategies.  Although both of these are in the marketing realm, they are different and sometimes conflict with one another.

I am amazed in the world of marketing how much time is spent on prospecting campaigns, promotions designed to attract customers.  Teaser pricing strategies hook the new client on price by using an 'introductory rate' and then raise the price once the prospect is used to the product or the service. These campaigns can succeed, however; they put the firm's relationship with your existing customer's in jeopardy.

The Ally Bank Ads illustrate this point brilliantly.  I have provided the link to the 'Ice Cream' advertisement.   This ad points out just how unfair it can be to treat potential customers better than existing customers. Yet many prospecting ads use specials, including price specials, to attract new customers.

The communications industry is notorious for these practices.  Cable companies and mobile phone providers both use these strategies in an attempt to get  customers to change from their existing carrier to theirs.  The battle for those customers willing to change, usually for pricing, is fierce, especially in mature markets that are traditionally 'sticky'.  Sticky markets are those in which the customers tend to make a decision and then stay put.  Retail groceries, financial services and communications tend to retain customers unless something goes wrong. 

It takes something really special to get people to change.  The problem is using these kinds of strategies can attract the wrong kinds of customers.  Most businesses need loyal customers.  These strategies attract a customer more likely to change once the special period is over.  They can also make existing customers feel as if they are being betrayed. 

Companies are simply not using the same creativity they use in acquisition campaigns.  Marketers tend to love the challenge of getting new customers, and leave the retention to customer service strategies.  There are some things that you can do for your existing customers.  Open houses, presentations, and customer only specials are just a few examples.  Many firms view trade shows as a means for acquiring new customers.  You should invite your existing clients to events before and during the trade show.  Use your existing clients for new product and service launches.
One other strategy for mining your existing customers is to ask yourself the questions, "Do all of my customers know every thing we do or sell?" It is amazing how often you may not have 100% of your clients' business.  Sometimes, this is intentional, as customers want diversity in their supply chain. Other times, there is an opportunity for you to get more business by your existing customers.  This can also help you develop and expand your product or service mix. 

Using as much creativity on customer retention strategies is one of the most effective marketing and promotional strategies in which you can engage.  Think about it, but keep in mind, the existing customer is less price sensitive than the prospect on the outside needing encouragement to come in.

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