(Engine) While ad spend continues to climb and CAC (the price you pay to acquire a new customer) follows suit, your most powerful response may just be harnessing the true potential of your already loyal customers.
Acquiring a new customer can cost anywhere from five to 25 times more than retaining and nurturing an existing customer. This study by Frederick Reichheld of Bain & Company states that just a 5% increase in customer retention results in at least a 25% increase, and potentially as much as a 95% increase, in profits.
If it’s that powerful, everyone is focused on it, right? Not exactly.
According to Invesp, 44% of companies have a larger focus on acquisition than retention. Conversely, just 18% focus more on retention. Addtionally, just 40% of companies and 30% of agencies focus on acquisition and retention equally.
Engaging with your top customers is one of the best ways to get feedback and increase loyalty. It starts at the top.
Say what you want about Gwyneth Paltrow’s always-controversial lifestyle brand, Goop, but engaging one-on-one with VIP customers is at the heart of its e-commerce strategy.
The reward for being a VIP of Goop? Happy hour at Paltrow’s place. If you’re lucky, maybe a phone call from Pepper Potts herself.
Goop’s Chief Content Officer, Elise Loehnen, says, “Engagements with VIPs are a key way the lifestyle brand and e-commerce site build customer loyalty. We identify cohorts that are extremely engaged or spending a lot of money over time. We’ve invited them to private events, like cocktails at Gwyneth’s house. We call them. Gwyneth calls them. We answer feedback emails.”
This is the type of customer engagement that has propelled many of today’s direct-to-consumer brands to levels of unprecedented customer loyalty in an age where brand affinity seems harder to come by than ever. Our options are plentiful. One could argue they are even overwhelming.
While Goop may successfully engage with top consumers post-purchase, they certainly struggle with decision-making leading up to that point. Want to avoid controversy and confusion? Walk with your customers, every step of the way.