With customer acquisition costs soaring every passing year, retention marketing has climbed up the priority list for marketers of late. Digital experts agree that due to the increase in Cost per Impression (CPM) on platforms like Meta & Google, the CAC on digital has shot up tremendously. Digital CPMs are rising at 20-25% per year, experts say.
The rise in CPMs basically means that brands now have to pay more for their ads to be seen by potential customers. As a result, the cost of gaining visibility and reaching target audiences on platforms like Meta and Google has become significantly more expensive. This increase not only strains marketing budgets but also forces brands to rethink their strategies to ensure they are getting the most out of their marketing spend.
Enter Retention Marketing
Brands are now shifting their focus to retaining the existing consumers, as opposed to acquiring new ones. For instance, Aabhinna Suresh Khare, Chief Digital & Marketing Officer and Head of Strategy at Bajaj Capital, shared that the retention marketing approach not only enhances customer lifetime value but also helps in building a strong brand reputation through positive word-of-mouth. “While acquisition marketing remains essential for growth, this is critical for business value,” he said.
Retention marketing leverages the foundation of trust and satisfaction built with current customers. By focusing on existing relationships, brands optimise their marketing efforts, tailoring their messages and offers to those who are already familiar with and fond of their brand. According to marketers, this approach is not just cost-effective but also deeply impactful, as satisfied customers often turn into brand advocates, furthering the reach and credibility of the brand organically.
Sumeet Singh, Group Chief Marketing Officer, Infoedge echoes a similar voice and adds that both approaches are important, but if a brand is acquiring consumers, it wouldn’t want the bucket to be very leaky.
Webengage’s Chief Growth Officer Ankur Gattani, who regularly deals with a range of marketers about retention, agrees. “All the companies trying to head towards enduring or profitable businesses are stepping up focus on retention,” he told exchange4media.
The Catchy Appeal of Retention Marketing
The buzz around retention marketing isn't solely due to the rising costs of customer acquisition—there's more to its appeal. Beyond just a reactive measure to economic pressures, retention marketing represents a proactive strategy with substantial rewards. As brands are struggling with the high stakes of acquiring new customers, the potential of retention marketing to generate higher returns with lower investment is becoming increasingly evident.
For example, Singh shared that most of the retention marketing strategies carried out by Infoedge are organic. “We use recommendations, we use app notifications, we use emailers and even the website,” she said. The money is only spent to re-engage certain cohorts that are probably not getting enough organic yield or cohorts where they are high in demand. “This re-engagement cost ranges anywhere between one-fourth and one-eighth of the acquisition cost,” Singh added.
These organic strategies not only cost less but also tend to resonate more with customers, as they are based on genuine interactions and useful content rather than overt advertising.
Speaking about how these cohorts are re-engaged, she explained that for the ones that are not yielding results organically, re-engaging them via mobile or desktop outside the brand’s platforms is a way. This ensures that even the less engaged customers are given the attention needed to bring them back into the fold, thereby minimizing churn and optimizing customer lifetime value.
The Cost-Effectiveness of Retention
Khare also feels that retaining an existing customer is generally more cost-effective than acquiring a new one. He said, “By investing in personalized services, loyalty programs, and continuous engagement, we are able to maintain and grow our client base without incurring the high costs. Plus retained clients give us better cross sell up.”
Bajaj Capital, as of now, allocates approximately 80% of its marketing budget towards retention marketing and 20% towards acquisition marketing. “This approach ensures that we continue to attract new clients while keeping our existing ones satisfied and engaged,” said Khare.
Basically, in a mature setup, according to Gattani, for any large-scale brand with ample customer data collected, retention efforts can offer 3-5x the ROI compared to acquisition. He also mentioned that in most consumer facing industries, where the acquisition costs are high and business viability depends on repeat transactions, retention marketing is quite effective.
“Except high value spaces where the first transaction is supposed to be profitable, all other industries need to be solving for retention,” Gattani said.
In conclusion, the cumulative effect of increased customer lifetime value and reduced churn makes retention marketing an indispensable component of a comprehensive marketing strategy, in today’s times where there is so much clutter in every sector that brand loyalty is diminishing with every passing day.
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