Should B2B Marketers Invest in Customer Acquisition or Retention?
WinWin Videos / Media272, 2019
Would you rather have $100 right now, or $113 a week from now? Choose wisely. How would your answer change if you had to make this decision every week for a decade?
Let’s face it, humans are awful at long-term thinking. While the second choice clearly provides more money, studies show we’re prone to choose the first option. To overvalue short term gains, even if it means we lose profit later.
When presented this way, a hypothetical decision like this may seem simple to some, but even finance experts make this mistake all the time. If you chose the $100, think of it like this: would you rather have $100 one week from now, or $113 one day after that? The choice seems easier when you have to wait for either option.
There’s a powerful business tactic based on this concept, but few people put it into practice because it goes against our instincts. It’s a trick that only the most successful marketers and CEOs use: to have a winning business, you need to keep your customers coming back, no matter what the short-term costs.
It’s why Amazon tells you about the benefits of a Prime subscription every chance they get. It’s why Elon Musk continues to stress out his stockholders with Tesla’s decisions, yet maintains aggressive long-term growth and a 99% customer retention rate. It’s why Zappos brands itself as a customer service company that “happens to sell shoes”: they value customer retention above all else.
Long-Term Thinking Leads to Long-Term Winning
Consider your company’s marketing mix: does it focus too heavily on customer acquisition, rather than retention? It can be a difficult balance. After all, building a new bridge sounds a lot sexier than performing maintenance on an old one. But the low cost of maintenance on an old bridge gets you a lot more lifetime value per dollar than building a new one does.
Understanding the power of long-term investments requires a fresh perspective on profit, because repeat customers also spend more on average with each purchase. For instance, the average repeat customerspends 67 percent more in months 31-36 of their relationship with a business than they do in months 0-6.
So for every purchase, a customer you’ve had for 3 years will start to spend almost twice as much as a new customer. That’s like getting an additional free customer for each repeat customer you hold onto. And if you’re worried about the cost to keep these customers, think again: increasing your customer retentionby just 2 percent lowers your total costs up to 10 percent.
Loyal customers also mean more word-of-mouth sales. Through positive reviews, they tell friends and colleagues about you when they are most open to the suggestion: at the moment of need. This means one good customer can increase your customer base on their own, year over year, with no cost to you.
Can’t I invest in both at once?
Even though a typical American B2B company will lose 24 percent of their customerseach year, many marketers hesitate to invest more in customer retention.
At WinWin Videos, this is the main concern we hear from first-time customers. But once they sign up and start using their first marketing video, they watch their conversion rates go up and more sales come in (a video on your landing page increases conversions by 80% or more). We find this makes it easy to wait as customer churn drops with each passing quarter.
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WinWin Videos stands apart from traditional video marketing companies, because we focus on your long-term interests. Each time we work with your customers, we reinforce the loyalty that keeps them coming back. We create immediate social proof for your business, but more importantly, we reinforce the certainty that this customer wants to keep working with you. They think of you when colleagues ask for recommendations. The relationship grows into more than just the products or services you supply them.
How does it work?
WinWin Videos lets you sponsor a marketing video for your customer, and in the process we create a video review for you, which tells the story of their success working with you. Giving a video activates the reciprocity instinct, which builds goodwill and trust with your customers, and helps you build stronger, lasting relationships. It also helps you in the short term though, because the video you receive will be instantly useful in your marketing.
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You may already know that 80 percent of your future profits will come from just 20 percent of your existing customers (that is to say, the customers that keep coming back). To focus on your best customers then, invest your resources where it matters most.
Despite the fact that marketers who use video grow revenue 49% faster than non-video users, we see WinWin Videos as a long-term strategy because we help you hold onto your existing customers. While yes, you’ll quickly see your conversion rates go up as you use these videos more, the bigger rewards are those that come with time.
WinWin Videos gives you more than video reviews for more authentic marketing. We provide an investment in you future, one that keeps customers coming back, year after year.