Acquisition vs Retention

The second Monday of September is a milestone in my personal, annual calendar because it marks endings and beginnings.

It signals the transition from summer (warmth, light, holidays, freedom of action) to autumn (start of a new school year, cold and wet weather, etc.)

However, once I'd re-acclimatised to being back in harness, the new term often had some good points (new subjects, teachers, classmates).

That milestone has constantly recurred in my professional life. The end of summer, when I'm refreshed after vacation, is a really useful point to do a very swift "where have we got to?" status check.

Why? Because we're about to pile into the final sprint of the 4th Quarter ... which as all B2B Marketers know, is chaos-on-roller-skates. Partly because it isn't a full 13 weeks but only 10 weeks (aaaargh!). And partly because of the added pressure of supporting Sales through the end-of-year closing madness (it's a pleasure, folks).

Status Check - where is B2B Marketing at end 3Q 2024?

What I'm hearing from a wide variety of sources (trade associations / business & management press / linkedin) is:

• static economy
• low demand
• tight budgets

In my view that means B2B Marketing has to focus attention to get the best possible results from limited resources.

• retention rather than acquisition
• identify and meet customer needs
• successfully convert limited demand.

Feedback

Dickon Purvis took the time to respond to my post:

"According to Byron Sharp's research and his book 'How Brands Grow', focusing on acquisition is exactly what one should do to in order to promote loyalty i.e. you can't influence retention directly."

Which is a comment I sort-of agree with ... and sort-of disagree with.

I hadn't heard of Byron Sharp's work before, so I went off and watched the TED Talk from Adelaide 2010, about customer loyalty: https://www.youtube.com/watch?v=d3Or0FkiIa0 ... which is thought-provoking.

In this presentation, Byron says the evidence about customer loyalty does not match the stories Marketers tell themselves. Well worth watching.

I'm going to dive deeper into those three bullets about 'focus attention' and explain what I mean more clearly.

The context

Let's remember that we're talking about B2B Marketing. and to me that means two things:

First - whether we're talking consumables, durables, or services, we're always talking about big value sales.

And it really doesn't matter whether we get to the big value via millions of very small sales items (nuts & bolts), thousands of small items (end-users for a global software contract), a small number of expensive items (a dozen CNC machines) or just one hugely costly item (building a new factory).

What they all have in common is that those big value contracts are few in number each year; the buying process is complex, with multiple members in the committee; the sales process is largely about building consensus over several months; and non-product criteria (like execution and service) are just as important as the technical excellence of the product itself; and they are multi-year deals, so the next repeat sale to the same customer is a long, long way off.

Second - you can't create demand. The market for big value deals is the size it is. Yes, a deal may come in earlier or later, which raises / lowers the annual total volume a bit. And yes, global industrial markets - especially those for durable investment goods - are subject to long-term economic cycles. But, by and large, the size of the cake is pretty much stable. Spending a whole lot more on promotion and advertising will not result in more customers to the extent that it can in B2C consumer markets.

That being so, I believe the B2B Marketers' job is to support Sales by focusing on conversion. Since we can't create more demand, we must sell more effectively. And by 'more effectively', I don't mean beat the 'competition'. Talk with Sales people and they'll tell you the biggest source of discouragement is putting energy into a proposal that ends up as a 'no deal' because the buying committee cannot reach a consensus. And that's what I mean by "making it easier for the customer to buy" - help to create that consensus.

The bathtub analysis

Customers come and go. Fact of life. So we lose one customer, and we gain one. We're all even, right? Not really.

Let's remember the old rule of thumb that "it costs five time as much to win a new customer as to sell to an existing customer" (or is it seven times as much?)

And then let's remember that the first contract with a new customer is often a Trial or Proof of Concept ... a deliberately small deal, to find out how our two companies are going to get on in the future. And that not all new customers become Key accounts.

Whereas the customer we lost was an established, middle-ranking contribution to the total revenues. A firm that had been with us for several decades. Admittedly, the revenues had tailed off over the last couple of years. But then they had a generational shift in management; and our Key Account Manager retired and ... well, we sort of lost touch. Shame, really,

Sure, it happens. But that's how Churn diminishes the gains of Acquisition.

Churn starts at that personal and individual level: people move on. They move from role to role, company to company. At about 16% per year, overall. Slightly slower for the upper management positions.

The practical upshot is this: if your CRM / email / contact database isn't gaining 16% new contacts each year, your knowledge of your existing customers is eroding. Which means you'll have a tougher job winning big value sales.

And if you're planning to expand into new accounts / segments / markets, the guideline or target for growth of the contact database has to be significantly higher.

4th Quarter 2024

Given the current state of the order books and the prospects for next year, will the Board give us more marketing budget for this year? Chances are, the answer is: "sorry but no".

Hence my strategy recommendation: shift the focus from "selling more" to "make it easy for customers to buy".