How to focus on customer engagement and improve your ROI

Friday, February 13th, 2015

The trouble with acquisition

It’s no secret, acquiring customers can be quite expensive and determining the actual return on investment for each activity is fraught with complications and questions: What is the lifetime value of the customer? What overlap is there with other marketing channels? Could you acquire that customer at a lower cost, or even for free, if you shifted your focus? All of these are interesting questions. Getting answers to many will improve the ROI of acquisition for any company. However, ironically, getting them is also likely to cost money via spiffy analytics tools, and there is a simpler solution. Focus on moving the people you do acquire from newbies (with a higher than average chance of never coming back again) into loyal, brand-loving customers.

Even if you ignore the fact that there is definite overlap between the channels that customers interact with on the way to a conversion, any assessment of marketing costs will establish that classic acquisition channels like paid search and display come hand in hand with high price tags. What’s more, in my experience many acquisition managers spend an inordinate amount of time explaining the intricacies of the value and cost of the activity being carried out to senior stakeholders in the business. All in all it is costly and time-consuming.

I’m not arguing that acquisition is important. Retaining 100% of customers is a pipe dream and the funnel always needs to be topped up. It’s just that it is way cheaper to focus on extending the life-time value of the customers you do acquire than focusing on driving up the volume of new customers alone.

Ensuring engagement gets enough attention

The issues arise when you focus too much of your marketing effort on acquisition and fail to balance team effort on establishing an on-going relationship with the customers you do acquire. In this scenario you are basically paying for every customer who passes through your checkout (and let’s face it a fair number who don’t) and any long term value it is driving is just good luck. The costs of retaining a customer are marginal in comparison – for example, to establish a good eCRM programme you need only pay the resource cost of setting up your programme and the standard on-going cost of your email platform, which depending on your size and your provider could be minimal. Not only are the costs low, but the return is huge – a typical ROI for email can be 10:1, where many acquisition channels can be as low as 3:1, even in established businesses.

So, what are the engagement opportunities?

There are a multitude of different opportunities to develop your customer engagement. And no matter how mature your business and how sophisticated your existing marketing is, there is always room for improvement. The key to knowing what to do next is listening to what your customers are telling you and then prioritising the points they raise.

Step 1 – Get your customers to set your engagement strategy

A lot of people are put off by customer research. It sounds expensive, slow and many see it as navel-gazing. In fairness it can sometimes be one or all of those things. It doesn’t have to be. There are dozens of easy to use, self-serve survey tools on the market these days. You can use your email database or your social channels to invite customers to take part (believe me a small competition can be quite enough incentive), you could have results within 24 hours.

Make sure that the survey you set up is nice and open. You could render the whole thing pointless if you ask too many leading questions or shy away from asking the difficult things.

One of my favourite questions to ask is ‘Would you recommend xyz to a friend?’. This is hugely insightful, they may say your prices are fine, your website easy to use but if they would not feel comfortable recommending you to someone they like then you are clearly getting something wrong along the way. Find out what that is by asking an open question about why. On the positive side it is a massive pick-me-up to read the comments from the happy customers and picking out a few verbatims and sharing them with the team can be quite motivating.

You can supplement this information with site analytics (Where are customers exiting or bouncing from the site? Where is your conversion funnel breaking? How many customers are returning and what are they purchasing the second time around?), customer call stats, social feedback and if you are brave enough you could even speak face to face with a few!

Step 2 – Prioritise and plan

Chances are if you did it right you have a pretty long list. You need to be realistic about what you can achieve with the time and the people that you have, and also mindful of which things are really going to make a fundemental difference to your business performance. Try not to use one or two customer’s feedback to fuel your own personal agenda. Ask yourself if the data shows that the issue is really significant. If not, move on.

Step 3 – Choose your channels

There are certain channels which are better suited for retention activity. It’s pretty easy to tell from the content on my website that I favour email. It affords a business with the ability to speak one-on-one to a customer within moments of that customer showing a preference on the company’s website. Obviously social is ideal, but the chances of a brand managing to attract enough followers or likes from their target market to make this a primary channel are slim.

To many the idea of fully fledged CRM is a bit intimidating. Fear not! My upcoming article ‘A simple guide to building your own CRM’ will demonstrate how you can do it yourself with the right data and a sprinkling of pluck.

For the more developed companies (with a little more budget available!) there are some really interesting content management platforms that enable you to personalise your content at an individual level, ensuring that the experience on-site is as streamlined as the experience on email.

Unfortunately, no amount of investment in email or on-site software is going to save you if you do not deliver operationally. Marketing must be the voice of the customer in any organisation and if hygiene factors like lead times or quality are not being met then you are setting yourself up to spend time and money on polishing… um… something that won’t get very shiny.

Step 4 – Set yourself (and the team) goals

Once you have your list it is important to set yourself goals around each element. When will it be delivered? What is the business benefit? Crucially, who will be owning it? Obviously a few KPIs would not go amiss at this point! It is at this point that I usually crack out an Excel spreadsheet and start tapping away. It is surprising how quickly you can overload yourself or the team by being too ambitious about the rate at which you will be able to work.

Step 5 – Review your progress

Make sure that once you have delivered something – you check it is working. It is surprising how often this does not happen. Make sure you are hitting the KPIs you set yourself. If you are not – adapt. It could be that you need to optimise your activity, it could even be that you need an entirely different approach.

What happens next?

It is tempting to say that once you have your retention programme in place you can go away and let it manage itself. If you implemented an automated email programme, then to some extent this is true. But is it not wise to relate to a launched programme as a finished programme. Content gets old, priorities change and most of all customer preferences change. Once you have your programme up and running it’s time to start again with your research phase – What do customers want? How do they view you? What are the gaps in your delivery…

If it makes you feel any better it won’t take as long this time around!

The reality is that you will never retain 100% of the customers you acquire. But by focusing on delivery, engagement and reward you can improve your retention rate and cut your marketing spend dramatically.

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