Break from the acquisition cult

Share this article:
Ernan Roman
Ernan Roman

I have heard many marketers complain about the escalating cost of acquiring customers in our fragmented, distracted media environment. Having paid the price, having invested all that time and effort, and having finally won the business, we talk a great deal about the importance of engaging, interacting with and retaining those customers. How well do we walk our talk?


Marketers love to throw around terms like "relationship marketing," "customer relationship management" and "one-to-one marketing." It would be nice if large numbers of marketers actually did those things, but the proof that most of us don't is in how budgets are allocated. 


Most companies still allocate significantly greater portions of their budget to customer acquisition than to customer retention. Most sales teams reward "hunters" far more generously than they reward "farmers," and the compensation for customer service representatives generally has nothing to do with their value in retaining customers. 


The lesson we continue to ignore is that it costs us far more to win a new customer than to retain an existing customer. This is not exactly new information. Many years ago, while I was working on a consulting assignment for AT&T, my contact pulled a sheet of paper from a file and handed it to me. It was a carbon copy of an internal study conducted by AT&T that stated that it cost five times more to generate a new customer than it did to sell to a current customer. The memo was written in 1918. Almost 100 years later, the lesson still holds true, except that the cost of acquiring, rather than retaining, is now on the order of 10 times higher.


Yet our metrics, compensation plans and organizational structures are still, by and large, driven by the "cult of acquisition." If we are serious about achieving the goal of true relationship marketing, we have to change how we invest the dollars at our disposal. We need to focus more clearly on the financial value of retention and lifetime customer value, and that has to be reflected in our metrics and budget allocation.


The best way to make increased loyalty and retention a reality is to create what I call Reciprocity of Value-based relationships with our customers. These are relationships in which customers trust us to deliver increasingly relevant and personalized online and offline customer experiences, based on the in-depth preferences they opt-in to share with us. 


The quality of the information customers choose to share with us during these reciprocal value exchanges is a potential game-changer from a competitive point of view, but it's also something more. The presence of that opt-in preference data that consumers have chosen to trust a company with is the best real-world indication of a marketing organization's willingness to walk its own talk when it comes to true customer engagement.

Share this article:

Sign up to our newsletters

Follow us on Twitter @dmnews

Latest Jobs:

Featured Listings

More in Data/Analytics

Data Helps Wyndham Hotel Group Deliver a Five-Star Experience

Data Helps Wyndham Hotel Group Deliver a Five-Star ...

The hotel company relies on technology to ensure that its rates and inventory are in sync across platforms.

Oracle Data Cloud Floats Into View

Oracle Data Cloud Floats Into View

It merges its BlueKai capabilities with other assets to introduce Oracle Data as a Service for marketing and social.

AmEx Veteran Takes COO Role at Acxiom

AmEx Veteran Takes COO Role at Acxiom

Kerry Hatch ran American Express's OPEN business card division and led units at Starwood and Time Inc.