All brands face the same quandary of whether it is better to prioritise acquisition or retention to drive growth. What makes more financial sense, adding more customers or getting increased revenue through existing clients?
For clothing retailer, Boden, the answer is not to choose between the two but rather use a balance of lifetime value for existing customers and predicted lifetime value for prospects, to guide where budget should go. As the company’s performance marketing and CRM director Jamie Irving told attendees at the Festival of Marketing (FoM), decisions also need to be balanced between immediate sales and the longer-term value of retaining loyal shoppers. In a session entitled ‘Acquire or Retain? That is the Question’, hosted by relationship marketing specialist Marigold, he outlined how decisions are made at Boden.
“It comes down to a balance between profit and growth and, for us, how much we can risk in-year versus how much we can risk in three to five to 10 years,” he explained.
“Lifetime value is a massive part of how we look at the success of our business, and that’s both for retention and acquisition. I know it’s often spoken about mainly as an acquisition driver. We see it as a really key instrument in valuing and deciding, who can we spend money on?”
Selling now, building for the future
To get a better understanding of how marketing activity can drive up revenue among existing and new clients in the short term and in the future, he explained Boden has moved to a three-pronged measurement strategy. In addition to last touch attribution, which is ‘of the moment’, the company is also looking at the incrementality in customer spend prompted by marketing activity, as well as marketing mix modelling to factor in the long-term brand value delivered by campaigns.
Lifetime value is a massive part of how we look at the success of our business, and that’s both for retention and acquisition.
Jamie Irving, Boden
For Marigold’s senior client success director Sarah Higgins, who took the stage at FoM alongside Irving, this approach is an essential part of any successful marketing strategy. She believes focusing too much on the short term ignores the value of building a loyal following, which will see revenue growth across the years to come, not just in the current campaign window.
“In a Marigold consumer trend index earlier this year, we found the probability of selling to any new customer versus an existing customer is significantly different,” she explained.
“For an existing customer, you’re looking at a matter of 60% to 70% likelihood of them purchasing versus 5% to 20% for a new customer or prospect.”
To begin this journey of building a valuable long-term customer base, additional Marigold research suggests the most successful tactic is to segment audiences for email marketing and then to personalise messaging. Timing campaigns around certain events – such as a new customers signing up, or any customer making a purchase – is also vital. When it comes to welcoming new customers, Higgins revealed that a series of welcome messages drive an increase in revenue two and a half times higher than a single message.
Behaviour and lifecycle triggers
“One of the key profitability drivers is frequency: we have to be able to build that frequency with a customer to get them to purchase more,” Boden’s Irving added. “This means a welcome to our brand is really important. We need to build some form of loyalty, some sort of recall up front, but we also need to increase the number of touch points where customers are going to find value in us.”
Irving reminding fellow marketers that if they are trying to establish a balance between instant sales from converting prospects and additional long-term sales from loyal fans, trigger events need to be based on both behavioural and lifecycle. At Boden, customers receive email or print communications that recognise both their recent behaviour and what stage they are currently at in their relationship with the brand. This latter element is the harder of the two to get right, according to Irving, but it can bring the greater impact on retention and long-term uplift in sales, so this is where Boden is currently focusing.
Personalise for loyalty
Customer messages, whether using behavioural or lifecycle triggers, are always personalised around the product types Boden knows a customer is most likely to be interested in. For Irving, it is essential for brands to get this right because “personalisation is relevance on speed” and showing people you understand them is vital for loyalty. Without a formal loyalty scheme, Boden relies on turning customers into “fans” by showing that they are valued and understood.
“For us, loyalty is a way of personalising messages, looking at what sorts of content we can put in front of people, appealing to people’s egos.” Early access to new product launches was one example he gave.
“We’ve also found within loyalty that lifecycle messages work for lapsed audiences. So, the idea of pulling on ego doesn’t necessarily need to be someone who has always been really active. It doesn’t need to be someone that’s active now. It’s just a relevant message.”
A crucial aspect for understanding each customer relies on not just the first-party data that comes from observing behaviour but also ‘zero-party’ data, for example preference data shared proactively with the brand. Irving reveals this is a major focus for Boden going forwards, as it continues to find the right balance between driving short-term sales and building longer-term loyalty.
This is a shrewd strategy many brands are taking, Marigold’s Higgins concluded, because according to Accenture, more than four in five customers are willing to tell brands more about themselves, as long as they know it will lead to better recommendations and a higher level of service. This, in turn, is a recipe for future sales and long-term loyalty.