Idea: What Is the Best ROI in Marketing With Content?
Marketing with content can mean many different things these days. Recently, we’ve seen the term content marketing applied to the use of social media, video commercial campaigns posted on YouTube, various forms of search engine optimization, inbound marketing, and on and on. The common thread running through these uses is their focus on customer acquisition efforts: building email lists, generating leads, driving traffic, getting likes and followers.
“Customer acquisition” is the classic term used to describe the marketing focused on finding new customers. According to recent research by Econsultancy, up to 80 percent of a typical marketing budget is allocated to customer acquisition. It makes sense as the leaky bucket of customer attrition must be constantly replenished. Acquiring new customers is critical to a company’s success.
However, over the past few decades, research by Bain and Company on the role of customer loyalty and company growth has demonstrated that investment in customer retention can provide an even better ROI than acquisition. According to Bain, 5 percent increases in customer retention can increase profits by 25 percent to 95 percent. And, depending on the type of vertical business a company is in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
Moreover, the research shows that even a slight shift of 1 or 2 percent of a marketing budget from acquisition to retention can have a dramatic impact on growing a company’s bottom line. Why? (1) Customer acquisition costs (CAC) are front-end loaded and extremely expensive in relationship to the revenue generated by the first transaction. (2) The justification for the high cost of customer acquisition is the opportunity to maximize the profit represented in the lifetime value (LTV) of the customer.
Bottom Line for Marketers: The LTV of an existing customer (the revenue generated across a series of transactions) is not fully recognized unless you focus on retention or loyalty and not merely acquisition. While content is an effective means to acquire leads and sales, it is one of the most effective marketing strategies for helping develop long-term customer relationships.