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Customers are the backbone of a company; they are the sources of finance and the reason why a certain business exist. An effectively managed business has an objective of satisfying its customers and developing close relationship that facilitates customer loyalty.
To attract customers and persuade them buy ones products takes a combination of business processes; effective marketing and sales strategies have a direct effect on customer’s attainment and development of customer loyalty. In customer acquisition and creation of loyalty, there are two main theories that a company needs to understand and decide the best approach to use; the theories are customer retention and customer acquisition (Spiro, Rich, & Stanton, 2008).
This paper compares and contrasts the cost of customer retention versus customer acquisition; in the second part of the paper, it will discuss the major differences between business-to-business marketing approach and business to consumer marketing approach.
After development of products a company need to find and persuade customers to buy the products; the focus customers are the target market group that the company embarks on developing appropriate marketing approaches to reach. After successful persuasion and conviction to customers that they deserve to buy a certain companies commodity, then the company is said to have acquired a customer.
Acquisition of customers takes different forms, convincing buyers of competitors to switch and buy products from the company or to develop market and sell ones products. In some cases, when a niche market has been created, then customer has been acquired. To acquire customers it calls for massive advertising and marketing strategies. To have an effective customer acquisition, a company has to implement an optimal marketing mix; the following are the 4ps of marketing used in customer acquisition:
Organisations whether is the service or goods industry need to set a price that is competitive in the market and offer maximum returns; the prices set should be attractive to the customers; this will make the goods competitive and convincing the customer to buy them is fast.
To sell a products, a company need to advertise and device ways to create awareness of the existence of the products; there are two approaches to promotion; PUSH and PULL approaches. The promotional strategy adopted by a company will determine whether it will persuade its customers effectively, different markets calls for different approaches to promotion and advertising.
To acquire customers, a company need to have its products and services where the target customers can get them
To convince customers, company products must be responsive to the needs of the customers.
To acquire customers, all the above factors needs to be considered, a costly activity calls for strategic planning to ensure that a method that uses minimum cost and yields high returns is adopted.
Customer retention is a selling strategy where customers are persuaded to continue using a company’s products; it takes the form of after sales activities and measures adopted to ensure that a customer buys a company’s product again. The process starts form the sales point where the consumer is convinced to buy the company’s product again because of the customer service received and the quality of products bought.
There are three aspects in customer retention:
- Long-term usage and satisfaction; this is where the company aims to have the customer support through purchase of its products for a long period.
- Buy more products: these are strategies implemented to persuade the customer buy more of the company’s products
- Word of mouth, under this approach, a company depends on its customers to spread their pleasant experience with the products so that more customers can buy the company’s products.
The two most important actions that lead to customer retention are offering quality services and continual products development.
Cost of customer retention versus customer acquisition
Both customer retention and acquisition are strategic policies and measures that a company has to implement using some finances and resources. The resources used are either direct or indirect: direct costs can be attributed to the function, for example, an advertising cost is a direct cost while indirect cost is incurred for actions that improve either consumer acquisition or retention for example product research costs.
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A research conducted by Frederick Reichheld of Bain & Company, suggested that the cost of retaining customers can be as seven times lower than the cost of acquiring customers; the report said that the different activities that are presale that a company has to undertake to attract customers are costly than the after sales activities used in customer retention. The report went further and suggested the following:
- Retaining a customer costs six to seven times lesser than acquiring a new customer
- Customer’s retention leads to high profitability than customer attention; company’s adoption the strategy has more than 5% increases in profits.
B2B marketing addresses the relationship that exist between competitors, the relationship has an effect on either business thus should be managed effectively. In course of marketing either company promote or demote the other companies products; some incidences calls for a combination of marketing strategies to reach targets customer, target customers of competitors is the same, the kind of relationship developed in a business-business marketing can be of current benefit to a company or can have positive effects in the future.
When developing B2B marketing, a company should ensure that the strategy is meant to benefit the two sets of companies; both the companies must have a common destiny and willing to collaborate.
The following are the factors to consider when developing a B2B marketing strategy:
- Will the strategy be of benefit to both companies, if yes then they continue
- What is the relative benefit of the integration
- The costs of the integration, costs involve monetary and social costs
Business to Consumer Marketing
Business to Consumer Marketing is the oldest and most direct form of marketing where the company targets customers directly and aims to develop a healthy relationship between the two; it aims at developing loyalty and strengthening ones brand in the market.
B2B marketing in most cases is deliberate among the companies engaged while in the case of B2C marketing, company implements different methods of persuading customers to buy its products and remain loyal to the company. The focus here is on the customer and counter attacking competitors.
To develop an effective business-customer relationship, an organisation needs to align its marketing and sales objective to the improvement of customer experiences; processes should add value to customers and increase the utility they derive from a commodities. Product development, after sales services and differentiation are the major approaches to an effective relationship between a customer and a company (Jobber & Lancaster, 2003).
Jobber, D., & Lancaster, G.(2003) Selling and sales management. Essex: Pearson
Spiro,R.L., Rich, R.A., &Stanton, W.J.(2008). Management of a sales force. Wiley: new York, NY