Old clients vs new client - budgetary impacts

Old clients vs new client - budgetary impacts

Are you assigning enough of your marketing budget to client retention? Do the majority of your allocated marketing resources get spent on new lead generating activities? When you consider that often 20% of your customers are credited for providing 80% of all business, shouldn't your marketing budget allocate resources on a similar ratio?

The marketing budget is a marketer's most important tool; it is the means to achieve the strategies, processes and activities outlined in the marketing plan. In particular, the marketing budget allocates funds for obtaining new leads and for encouraging existing customers to spend/interact with your business. Many marketers budget the majority of their spend to new customer acquisition; some don't even allocate any funds to encouraging existing customers to transact again.

One of the best ways to ensure your marketing budget stretches further is to invest in marketing strategies aimed at encouraging your customer base to spend again, and continue to spend more, more often. As opposed to new lead generating activities, marketing to your client basis is more cost-effective, with a higher success rate and a better return on investment. Allocating funds in this way presents an opportunity to increase sales without increasing your marketing spend.

The reasons for this are fairly self-apparent; your customer base shares some key characteristics that are not necessarily shared by potential leads. These characteristics include;

You already know your customers and have a brief, or detailed, profile of them

You already know how to contact your customers

You don't need to educate customers about your business or at least not to the same degree as a new lead

Your customers have, at least once, required what you offer

Your customers like you - if you previously provided them with a positive customer experience

Chances are a competitor is not already fulfilling their requirements or why else would they have bothered contacting you?

By assigning your marketing budget to focus on your customer base you can take advantage of these characteristics. It is simply a lower risk investment to try to reactivate existing customers than to try to find new customers. It takes less time and less money to research your current customers, to find them, to contact them and to convert them, and to do it again and again.

This budgeting strategy can also be refined even further. If 20% of your customers are providing 80% of your business, how can you utilise your marketing budget to get that 20% to spend even more? If you are seeking new sources of business, why not target your inactive customers? Again it is less expensive to convert your inactive customers into active customers, than to try to convert new leads inactive customers will share some of the above customer characteristics. If you are just starting out, of course you will need to spend a greater proportion on new lead generating activities, however, even from the very first customer, if you focus on customer retention as well you are only aiding your chances of success in the long-term.

Prioritise your marketing budget to the activities that encourage your customer base to increase their spending and transactions, and you will improve the return on investment for your marketing budget.

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