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Increased Profits with Customer Retention

June 24, 2022

Courtesy of 3SIXTY Interactive

Peter Drucker famously said, “the true purpose of a business is to create and keep a customer.” Most businesses are intent on the previous and oblivious about the latter, which begs the question, why? There are plenty of reasons to reverse this modern-day thought process completely:

Statistics on the importance of customer retention abound, yet it is the new customer acquisition that captures our attention, effort, and money.

What Is The Value

To truly understand the value of customer retention, you have to do the math. How much does it really cost to acquire a new customer versus how much does it cost to retain a current customer?

Here’s where it gets a little bit tricky. Your current customers have two distinct value propositions for your company; tangible and intangible.
The obvious tangible value your current customers bring to your company is money. They’re buying what you’re selling. This value is self-evident and very easy to measure.

The less obvious value that your current customers bring to your company is the intangible elements such as recommending your company to another company or their positive impact on your brand because they are working with you.

Though intangible values are difficult to calculate, it is essential to attempt some type of dollar amount for the value that the intangible brings. For example, if a current client has recommended you to two other prospective customers, you could assign your average customer acquisition cost to those two recommendations.

Do The Math

There is a pretty simple formula for calculating customer value:

(Total Customer Benefits – Total Customer Costs) x Customer Longevity = Customer Value

Let’s unpack this formula just a little bit.

Total Customer Benefits: This could be the sum of several benefits your company gets from a customer. Things like sales dollars, referrals, and the marketing value of saying that they are one of your customers (how many times has a prospective customer ask you who you work with).

Total Customer Costs: This will be the sum of things like your average cost of acquisition for gaining customers, the cost of the product or service that your customer purchases from you, or additional cost incurred for last-minute change orders.

Customer Longevity: On average, how long do you anticipate a customer will continue to do business with you? This is the one component you can use to increase a customer’s value to your company. Because most customer costs are front-end loaded (i.e. acquisition costs, building working relationships, etc.), the longer you can retain a customer, the greater value that they will represent to your company.

Digital Marketing’s Role

Typically, marketing’s role for a company is focused on customer acquisition; however, it can also have a role in customer retention, as well. Here are some ways that digital marketing can assist with your company’s goals for increasing customer retention:

Communication: It’s not uncommon to see companies running email campaigns for customer acquisition, but seldom will you see a company that has put together an email marketing strategy for its current customers.

Some common uses for email marketing for greater customer retention are:

  • Welcome Aboard: Sending a welcoming email to a new customer should be a part of everyone’s onboarding process.  It helps to calm any post-purchase fears, reinforces the fact that they’ve made a good decision to do business with you, and gives you another chance to manage expectations.
  • Just stay in contact: Think about how often your current customers heard from you when they were just a prospect. Are they hearing from you at that rate now?
  • Exclusive Offers: Who doesn’t like a deal? Too often companies only offer promotions to prospective customers (think cable tv).  Let your current customers know that you appreciate them by offering them some special promotion.
  • Anniversaries: Send your customers a Happy Anniversary email on the anniversary of when they started working with you and thanking them for being a customer.
  • Feedback: Asking for feedback from your current customers is highly effective via email and could also be used to encourage them to complete a Net Promoter Score survey.
  • Education Emails: Use this as an opportunity to give them some insider information on their most recent purchase or one of your products or services.  Because they are a current customer you’ll be able to personalize the content of this email specifically for each of your customers.

Content: When was the last time you created an educational piece of content focused on people who are already your customer? You could also use your blog to create articles that will specifically benefit your current customers.

Webinars: Build relationships with your current customers by offering specific free webinars that focus on topics that just current customers will find interesting. Some reports say webinars can increase customer retention by as much as 69%


There are several theories on why companies are so focused on customer acquisition. Still, the facts are clear that including customer retention as a goal within your digital marketing strategy will increase your company’s profits while decreasing the stress on your company’s need for continual increases in new customer growth.

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