Brands lose out when marketing wins are measured solely in acquisition
Today, brands prioritize acquiring the next consumer at the detriment to their relationship with their existing customers. What if your existing consumer could bolster revenue another 40%?
By David Nelsen
A large portion of my job leading Bumped involves conversations with the Executive teams of brands and banks we’re selling to. That means every day I get the opportunity to wax poetic about consumer relationships, nerd out on customer experience, and brainstorm with like-minded folks about how to create the best possible connection between brands and their customers.
In recent years I’ve seen a trend creeping into these conversations, particularly on the Marketing side of the house — teams are being asked to focus predominantly or entirely on acquisition. That means oftentimes their individual or team success hinges on bringing in a target number of new customers to the brand, and retention and customer engagement fall by the wayside in an effort to hit those aggressive “growth” targets. In fact, the majority of companies out there incentivize their teams to acquire new customers, but have no incentive for shifting their existing customers’ behaviors.
This could be because we lack the mechanisms to create true loyalty. But if data shows that there is a solution that results in 53% top line revenue growth by leveraging your existing client base, or gives you the ability to steal 24% of market-share from a competitor (like we saw in the case of Lowe’s and Home Depot), it’s a true loss to focus only on acquisition. The consumer ends up on a merry-go-round of incentives without ever building a true relationship.
Acquisition vs Retention
Acquisition will always be critical to the growth and success of a brand, but becomes problematic when it’s the core measurement. While the old school business adage of “it’s five times cheaper to keep a client than sign a new one” doesn’t always translate to the new era of digital and social direct to consumer (DTC) marketing, you’re still leaving revenue and a relationship on the table. As Wharton Marketing Professor Peter Fader said in Forbes: "Decisions about customer acquisition, retention and development shouldn’t be driven by cost considerations—they should be based on future value.”
Dismissing the importance of customer retention and engagement tells me you’ve already written off the potential lifetime value of your customer. Let’s look at the Bumped data proves how established industries can increase consumer engagement and spend by focusing on retention — in this case by rewarding users for recurring, ongoing transactions.
Increasing Engagement, Loyalty, and Revenue
Over a two-year data study, Bumped automatically rewarded users in fractional shares of stock when they made purchases or paid their monthly bills with over 80 companies, including acquisition-focused industries like Telecomms (mobile phone carriers), Club Warehouses, and Restaurants. I’m choosing these examples simply because of the way their business objectives align to the need for acquiring new clients, not because of their chosen marketing priorities.
Let’s start with Telecomms. This is an industry that may not look like a good fit for retention and engagement marketing given the contractual/subscription model that’s so common. Yet, in our pilot we rewarded users for every transaction at AT&T, Sprint, T-Mobile, and Verizon. We found that even in a subscription-based category, rewarding for every transaction (retention & loyalty) drove significant behavior change.
The three mobile brands had an average retention rate of 89%. What’s more, on average, customers who became owners of their mobile brand spent 13% more monthly, and transacted with them 14% more often. Verizon saw the most significant spend increase with an additional average monthly spend of $52.46 per month. That 42% increase in spend is more than the cost of purchasing a new iPhone 11. Without a loyalty, reward, or retention effort, that additional spend could be left on the table.
The Club Warehouse model is another example of an industry that depends on new users — to shop at places like Costco or Sam’s Club, customers need a membership to get access to the best deals, so it makes sense that focusing on creating new members would be critical. Yet, let’s look at what happened when we rewarded per transaction, ongoing.
The average Costco customer visited the warehouse store 30% more often and spent $80.68 more monthly — focusing on retention and engagement in this case can account for almost $1k in additional spend annually, per customer.
Lastly, in the Restaurant category we found Red Robin customers doubled their spend with the restaurant after being rewarded in Red Robin stock.
First, Bumped users were rewarded in fractional shares of Red Robin stock for their spending with Red Robin, becoming owners in the brand. They visited the restaurant 0.16 more times monthly, and spent an additional 32 percent monthly.
When some users selected Red Robin, they received an email alerting them that they would get $10 of Red Robin stock as a thank you for choosing Red Robin. Customers who were given the $10 stock reward spent twice the amount of users who were not (by both increasing transactions and visiting more often).
Bumped saw the initial stock reward have a long-term effect on customer behavior as well. Those users showed a 143% increase in spend over the first six months, and a 116% uplift in spend among those users 12 months later. Impressive staying power for a one-time $10 investment.
Mutually Supportive Marketing
Acquisition and retention can (and should) be complementary parts of the marketing equation, and I feel for teams that are asked to focus on one over the other. Both have a purpose, a place, and provide value to the business — our goal is to help you launch a reward program that connects the two.