Executives at Fortune 1000 and mid-cap companies are focusing more on customer retention versus acquisition, according to a survey released yesterday by direct marketing firm Grizzard Performance Group, Atlanta.
Those surveyed in May and June included senior level marketing executives at Fortune 1000 companies and mid-cap companies with less than $1 billion in annualized revenue. It revealed that nearly twice as many executives (58 percent to 30 percent) across all industries and company sizes are devoting more resources to customer retention over customer acquisition.
Grizzard said the survey represents a shift. The results of a similar senior level marketing executive survey commissioned by Grizzard Performance Group in 2002 revealed companies were devoting more resources to acquisition over retention by a margin of almost two to one.
The current survey found that companies are distinguishing customers by value and allocating marketing budgets accordingly. Seventy-percent of Fortune 1000 companies say they are doing this while 74 percent of mid-cap companies use this strategy. However, the findings also revealed that companies are inaccurately defining customer value.
The No. 1 customer valuation criterion companies rely on is annualized gross sales, followed by number of unique orders. Customer profitability (annualized or lifetime) ranks third as a valuation criterion when it should be the primary focus for companies seeking to optimize corporate resources.
“This misguided notion that greater sales equals greater value clearly shows that we’re still struggling in the wake of corporate sale’s takeover of the marketing function when the bottom fell out four years ago,” said Michael King, group vice president at Grizzard Performance Group, in a statement. “But as our study revealed that the sales acquisition binge has subsided, these findings also prove that corporate marketing is gaining control, once again, and moving their companies in the right direction.”
Additional survey findings include:
· Companies in the South and West are almost twice as likely to favor retention over acquisition as companies in the Northeast and Midwest.
· High tech companies devote the most resources to retention, followed by manufacturing and service firms.
· Service firms were most likely to distinguish and base their budgets around customers providing different value to their company, followed by high tech companies and manufacturing.
· The smaller the company, the more likely the company was devoting more resources to retention than acquisition. Larger companies are more likely to distinguish customers based on value.
· When asked to define customer profitability, 39 percent of companies cited annualized profit, followed by an increasing profitability trend (24 percent). Lifetime value (historical or predictive) ranked a distant third at 16 percent.