For many products and services, it’s cheaper and more fruitful to mine an existing customer base for incremental sales than it is to spend money finding new customers.

How many press releases have you seen in your marketing career that brag about the number of new customers an ad agency or media property was able to secure for a client? Too many to count? Okay, now how many releases have you seen that brag about the number of existing customers retained by a marketing effort? None? That’s what we thought.

Spending boatloads on customer acquisition while de-emphasizing (or completely ignoring) customer retention is not atypical in today’s marketing landscape. Acquisition marketing gets the most attention, the higher priority and the lion’s share of the marketing budget in the vast majority of cases. Marketers understand that in order to grow, one needs to win new customers. All too often, however, they forget that they have to avoid losing existing customers as well.

Rewarding Acquisition

Just as people revere King Arthur and his Knights of the Round Table for embarking on their quest for the Holy Grail, we praise marketers for riding forth to find new customers. But does anyone remember the names of the knights who stayed behind to defend Camelot? Not likely. Similarly, retention marketers are the unsung heroes that keep a company from losing ground to lack of loyalty, price sensitivity and other forces that can cause customers to forsake one brand for another. While their efforts often produce terrific results, they still take a back seat to acquisition marketing.

“I believe this is due to a number of issues,” says Brian Mondry, senior account director at Beyond Interactive. “These include:

1. Client organizations seem to reward new customers/users/subscribers more than additional revenue from existing customers
2. It is easier to measure acquisition than retention, except in cases where clients have a sophisticated database system in place
3. Because retention marketing is dependent on a centralized database strategy within client organizations, it is often not feasible to develop effective retention programs
4. Agencies shy away from retention marketing because it requires a different mindset than acquisition marketing which encompasses broadcast and print. Retention marketing tools are primarily the phone, direct mail and e-mail.”

The acquisition effort gets the glory – fighting on the front lines, using higher profile media vehicles, and keeping one’s nose out of the database. Is it any wonder that acquisition marketing is emphasized? But is it more cost effective?

Acquire Once, Remarket as Needed

Some marketers have found significant value in using their acquisition efforts only to establish a primary contact with a prospect. Upon securing a consumer touch point, they remarket to, develop and retain the prospect over a period of time. For many products and services, it’s cheaper and more fruitful to mine an existing customer base for incremental sales than it is to spend money finding new customers.

“I believe online media can do a great job on both (acquisition and retention),” says Mondry. “However, if we are looking at this from a cost-effectiveness perspective, I’d say an online program tied into a customer database is the optimum retention program.”

When asked what specific tactics were working for clients, Mondry responds, “E-Newsletter programs that speak to the specific needs and mindsets of well defined consumer segments within a client’s customer database. These ‘communications’ need to strike a fine balance between educational/informational and promotional content if they are to be well received by customers.”

Developing prospects over time with customized and personalized communication can help establish or increase a brand’s relevance to a particular customer segment’s lifestyle. The Internet’s self-selecting nature and two-way communication can facilitate this through allowing the prospect or customer to place himself into a specific lifestyle or interest group.

Developing Loyalty in a Disloyal World

From there, it’s simply a matter of tying the brand or product offering to those lifestyles and interests. Relevant brands and products survive in an increasingly competitive landscape where price sensitivity and frequent promotion can cause consumers to switch brands on a whim. They do this by forging relationships through strength of brand and product attributes.

What makes someone buy a $1,200 Tag Heuer watch when a $100 Seiko tells time just as well? In the majority of cases, it’s the brand. If too many people make their choice between the two products based primarily on price, perhaps consumers just aren’t seeing the value behind the brand.

“One of the primary goals of building customer loyalty is to protect yourself against future price encroachments,” says Mondry, “so if price is becoming too big an issue then retention efforts should be re-visited to see what is wrong.”

Often, a customer database is segmented into buckets that are delineated by loyalty. Buckets containing overly price-sensitive consumers are often the ones that receive the least amount of attention from retention efforts, as their loyalty can usually be bought with coupons or other methods of discounting. And if price is the driving issue, fighting to retain too many of these consumers can hurt a company’s profit margins. Sometimes, it’s better to let the competition expend resources on keeping overly price-sensitive customers loyal.

On the other hand, if consumers see value in a brand and can become loyal to it based on factors other than price, a good retention marketer can lock such consumers in for the long haul, not only making it difficult for the competition to lure them away, but also locking in higher profit margins through a base of customers with a higher lifetime value.

One Hand Washes the Other

Ideally, acquisition and retention efforts drive one another, as they both seek to learn as much as possible about the ideal consumer of a particular brand. In an integrated campaign, the media environment from which a marketer plucks a number of new customers can speak volumes about behavior, demographics, interests and lifestyles. The acquisition campaign thus feeds valuable information to the retention effort.

By developing that customer over time, the marketer learns more. This information can then be used to find more media environments that fit the target, thus enabling the marketer to acquire new customers more efficiently. And they’ll be the right type of customers – if analysis of the retention effort is conducted properly, the acquisition effort will result in not only a larger customer base, but one with a higher average lifetime value.

But are the two efforts working in concert to one another’s benefit?

“No,” says Mondry. “Marketers are not doing all they can to understand their most profitable customer segments. This is due to the lack of investment in sophisticated, centralized database systems that encompass acquisition source and all subsequent purchase and service history. A better understanding on lifetime value would certainly help shape the acquisition side of things because it provides the data necessary to ascertain what your allowable cost per lead should be. This has major implications for media budgeting and placement.”

A Bright Future for E-Mail?

If marketers really want to leverage the initial learning they get from a customer acquisition so that they can use it to develop a prospect, they need a media vehicle with special properties:

1. It needs to be easily customizable, so as to better speak directly to consumers, based on what marketers know about them.
2. It needs to operate on a “push” model, such that marketers can acquire once and remarket at will.
3. It needs to be cheap and easily disseminated.
4. Data gleaned from interaction with the medium must be easily tracked and integrated into customer databases so that it can be turned into actionable information and intelligence.

What medium fits all these criteria like a glove? E-mail.

Perhaps it’s time to look at e-mail through a different lens – not one in which marketers rent lists of potential new customers, but one in which marketers build their own lists of interested prospects and existing customers. What many have seen as an acquisition tool could be the ultimate weapon in the battle to retain customers.