Acquisition Addiction’s Impact on Customer Experience ROI

Addiction to acquisition of customers is taking a toll on customer experience ROI. Did you know that 1.8 trillion dollars lost through customers switching suppliers every year in the USA is equivalent to the GDP of Canada or Italy? This is almost as much as the combined valuation of Facebook and Google ($2.1 trillion).

Forty-four percent of companies don’t know their customer turnover rate. A 20% churn rate means that our companies are selling for five quarters to hold onto the revenue of four quarters.1 These stark awakenings were presented by Adam Dorrell, CEO of CustomerGauge, at the San Francisco Monetize! conference and in his article, Welcome to Churn Nation, The 9th Biggest Country in the World You’ve Never Heard of — But Are Living In. He said:

“Warning: Losing customers can damage your wealth. It’s been proven that it costs 5X to 25X more to acquire customers compared to the cost of retaining customers. And increasing retention rates by 5% can increase profits by 25%-95%.”

Do we believe “the purpose of Marketing is to maximize revenue leads for Sales” as 70% of CEOs now expect?2 Do we really believe “the purpose of business is to maximize profit for investors” as economist Milton Friedman proclaimed?3 Or do we really believe that “the purpose of business is to create and keep a customer” as management guru Peter Drucker taught?4

Your choice among these 3 disparate goals is much more than semantics.

  • Maximizing profit for investors (i.e. Wall Street-centric management) justifies all kinds of shortcuts that ironically have high costs. A recent Wall Street Journal article reports: “James Dimon and Warren Buffett are urging companies to consider ending the practice of providing quarterly earnings guidance, arguing that it encourages an ‘unhealthy focus’ on short-term profits at the expense of long-term growth and economic strength.”5
  • Maximizing revenue (i.e. Sales-centric management) is a continuous hamster-wheel that perpetuates complexity of managing expectations. Sweetened deals to lure away competitors’ customers can alienate existing customers. A wider array of customers means more customer personas and subsequent high demands on Customer Service and Customer Success roles. Marketing’s preoccupation with the first stages of the customer journey means weak attention to post-purchase stages. Michael Brenner, CEO of Marketing Insider, says: “The biggest mistake companies make when analyzing retention rates is not seeing that a high churn rate is the result of poor customer acquisition efforts.”6
  • Creating & keeping a customer (i.e. customer-centric management) is guided by customer lifetime value. It balances growth of revenue and profit, short-term and long-term, and interests of customers, employees and investors. As such, it requires stellar alignment. That’s not as impossible as it seems, given the promises of today’s technologies. The best-loved brands are cracking the code. A Harvard Business Review article explains: “Pushing organizations to rethink how they add value to their customers stimulates enormously productive discussion. By investing in and enabling new customer capabilities, firms create new ways for customers to increase their lifetime value. Making customers better truly does make for better customers.”7

Do you need a 12-step program to kick acquisition addiction? Maybe. Four prerequisites are outlined in my article, What is Customer-Centricity DNA? — align from the top, all hands on deck, maximize value attainment, and maintain transparency. A one-time investment in these four prerequisites establishes the foundation necessary for achieving the full financial promise of customer experience investments. Give yourself a gift that keeps on giving.

For Marketing’s shift from acquisition addiction to retention riches, here are three keys: context, alignment, and nimbleness.

1st Key to Retention-Rich Marketing: Context

Outside-in context should be natural for marketers, with access to market research, customer intelligence and predictive analytics. Outside-in refers to the importance of customers’ inputs as a guiding light for an organization’s inner workings. It’s vital to step into customers’ shoes to double-check that every marketing effort meets outside-in criteria.

Customer lifetime value context brings data to life. Speak the language of managers by quantifying customer intelligence in currency figures. Even if customer lifetime value is expressed by quick-and-dirty revenue estimates, this tells managers how much of their future is at stake (or in opportunity). It prioritizes resources and motivates action and momentum. An example of this is CustomerGauge’s Monetized Net Promoter Score® which clarifies and compels strategic management of customer experience. Continual improvement of operations, policies, processes, and handoffs is essential to customers’ realizing Marketing’s value propositions and brand promises.

End-to-end customer journey context allocates Marketing resources and attention to maximize customer lifetime value. It’s a reminder that customer experience is cumulative: interactions are additive and forgiveness for mis-steps can be difficult and costly.

A surprising realization of over-emphasizing customer acquisition versus retention was revealed when marketing professionals at a conference used colored stickers to indicate their Marketing department’s current role in each phase of the customer lifecycle: green for strong marketing efforts, yellow for mediocre marketing efforts, red for weak marketing efforts. Far more green stickers were placed on customers’ steps for discovery, decision, buy, and get help — primarily pre-purchase phases.

On the other hand, far more yellow and red stickers were placed on customers’ steps for receive, install, learn and use, and achieve goals — all post-purchase phases. Keeping the customer’s end-to-end journeyin mind is essential to maximizing customer lifetime value.

Marketing Lifecycle

 

 

 

 

 

2nd Key to Retention-Rich Marketing: Alignment

CEO-CMO alignment right-sizes expectations for Marketing’s role in customer experience management and revenue growth. Marketing is a critical player, but pragmatically, other disciplines must lead certain essential aspects of customer experience and growth. For example, Legal and Operations functional areas obviously play major roles in customer experience performance. Marketing has definitive strengths which are complemented by others’ strengths to do the whole job in tandem.

Marketing-Sales alignment right-sizes attention across the end-to-end customer journey. Shared passion for customer experience excellence is proven as the ideal rallying point for Marketing and Sales alignment. Strong customer experience performance in the post-purchase phases yields better customer references, case studies, and referrals. Continuity of customer expectations management from Marketing to Sales to Operations simplifies customer retention and reduces the burden on Customer Service and Customer Success.

Enterprise alignment sounds scary, but it’s a matter of sharing customer intelligence with relevance and resonance across the company. The more educated Marketing’s counterparts become, the more in-tune with customers’ expectations they’ll become. This shared outlook nurtures common goals, transparency, and collaborative attitudes.

In response to a McKinsey article, We’re All Marketers Now, a blogger observed: “This new era of engaging customers is requiring commitment from the entire company and how that means the marketing organization must be redefined and adapted.”8 Customer engagement is much more than experiential marketing; it’s influenced by the cumulative effects of the company’s ecosystem.

3rd Key to Retention-Rich Marketing: Nimbleness

Organizational agility — or nimbleness — means the Marketing department can shift gears “on a dime”. New developments in our 24/7 global marketplace, emerging mobile apps and startup businesses, and other sudden changes require Marketing to be quick-footed. Digital marketing and predictive analytics are vital to real-time customer experience effectiveness.

Scalability to meet rapidly evolving demands relies not only on technology but also on organizational learning, knowledge management and formal change management skills among all marketers. The more holistic marketing management becomes, the greater influence Marketing will have on the company’s customer-centricity and customer lifetime value growth.

Kick your acquisition addiction. Rehab your company by getting back to the basics of creating and keeping customers: understand them thoroughly, show them you care about their goals, and be obsessed with increasing mutual value now and across the maximum lifetime of the customer relationship. A focus on creating and keeping customers yields the desirable byproducts of optimized revenue and profit growth. Claim the full promise of customer experience ROI by balancing customer acquisition and retention.

12018 NPS® & CX Benchmarks Report, CustomerGauge.
2Almost 70% of CEOs Now Expect CMOs to Lead Revenue Growth, VentureBeat, 16 December 2016; citing CMO Council / Deloitte study: The CMO Shift to Gaining Business Lift.
3Milton Friedman and the Social Responsibility of Business, Greenbiz, 24 November 2006.
4The Importance of Creating & Keeping Customers, Financial Times, 2011.
5Buffett, Dimon Team Up to Curb “Unhealthy Focus” on Quarterly Earnings, Wall Street Journal, 7 June 2018.
6Customer Retention — The Lost Art (And Science) Of Marketing, 30 August 2016.
7What Most Companies Miss About Customer Lifetime Value, Harvard Business Review, 18 April 2017.
8Redefining the Marketing Organization — Would Peter Drucker Have Been in Agreement? Business Insider, 5 August 2011.

This article is fifth of a six-part series as an exclusive CustomerThink Advisors column: How Customer-Centered Marketing Steps Up Your Performance & Influence.

1. Customer-Centric Marketing: Step-Up Performance

2. Customer-Centric Marketing: Align for Growth

3. Is Your Customer Engagement Really Customer-Centric?

4. Marketing’s Role in Employee & Customer Experience Journeys

4a. Customer Journey Insights Increase Marketing Impact

Read my article on sales leads

sales funnelHow Many Sales Leads Do You Need?

You think this would be a simple question. Read this example to understand how to better develop credible sales lead numbers.  » Read More

5. Acquisition Addiction’s Impact on Customer Experience ROI

Image licensed to ClearAction Continuum by Shutterstock.

Note: this article originally appeared October 3, 2018 at CustomerThink.com

Lynn Hunsaker

Lynn Hunsaker

Chief Customer Officer at ClearAction Continuum
Lynn Hunsaker led customer experience & marketing at Applied Materials and Sonoco. She is a CXPA board member, SVAMA past-president and CustomerThink Hall of Fame author. She taught 20 courses at UC Berkeley Ext, SJSU & Mission College (Marketing Ops at UC Santa Cruz Ext currently). Lynn authored 6 benchmarking studies and 3 CXM handbooks (Amazon). She is a CXPA Recognized Experience Education Provider with CCXP students from 70 countries. Lynn is Chief Customer Officer at ClearAction Continuum and co-founder of ClearAction Value Exchange.
Lynn Hunsaker

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