Which is the best strategy: customer retention or go for new customers?

I think everyone agrees that word-of-mouth marketing and advertising is the best ever for any product, be it a low involement or high involvement product.

Customer retention leads to a kind of brand loyality. Brand tribes provide useful feedback for the improvement of the product too!

In todays context customers must be retained which is very difficult owing to various factors like choice of various brands in the same product category,available across the length and breadth of the nation,added with increased awareness created by multi media ads coupled with down the line sales promotion activities attracting your existing customers.Present day consumers are highly demanding not easily satisfied with an open mind to change even for a marginal difference in quality and price.They are pushed by various sales promotion activities.Self service Department stores displaying a wide variety of different SKUs give ample opportunities to the customer to know more about any product.under such circumstances there is every possibility many customers opt for a change of brand loyalty.The ideal option will be to go all out to retain the existing customer base while simultaneously scouting for new buyers to  increase market share

I will support the idea of customer retention as i will cost less in terms of time/money & having more possiablitly to close him with new product line (consolidation) or repeat sale.

Dear sir,

I was not able to think such a small and deep answer.

You have explained everything in very few word.

Retained cusomers are brand ambassdors and give free word of mouth to new cusomers and help attain new cusomers.

thanks

Dear sir

I'm fully agree with your point but this is true for only those products which we need at all stages of lifecycle.

We demand different products as per demographic factors like age, income, profession, social class etc. When any of these changes we no more demand the products we are previously demanding but demand a different product as per our needs.

So by only retaining customers we can't survive. We need to put more effort on  retaining only those cusomers which are still meaningful i.e. customers whose need are still met by our products and who will going to demand our product in future and put less effort on unprofitable customers. So spend your money on acquiring new potiantial cusomers instead of spending on retaining unprofitable cusomers who are now not going to buy our products.

Thanks

I think you should divide marketing from operation.

If you've asked this question as an operational point of view, then keeping customers is the best strategy.

But from a marketing point of view, going after new customers is the best strategy.

Your existing customers are going to die off or gravitate to other brands so your marketing efforts need to focus on filling the pipeline.

Let me simplify this, If you are a jinni & Johnny, children wear brand. Then you cannot expect those children to remain brand loyal until their death. Whenever they grow, they will move towards other brands like Levi’s, Lawman, etc. So here you have to go for new customer strategy.

And, if another brand enters into your category and targeting the same audience, then there is a possibility that they switch from your brand to that new brand. In this situation, you should go for customer retention strategy.

So, first of all, you should try to find out the reason, why you are losing your customers? It’s because, they are growing or switching to other brands? And then you should use the appropriate strategy. Otherwise both the strategies are good, but it depends on your situation.

I think it is not correct. When an organization is able to serve their customers with quality products and services, their customers are retained.The relationship between the company and the customers are different from the relationship between the company and its employees. The first one is for business relation and for mutual benefits. Both will never try to part with each other. Moreover, in certain cases the company is ready to meet the demands of their customers, by sacrificing their profits up to some extent, with a view to keep their customers long association for their mutual business interest.

But in the second one the relationship is personal benefits. It is not acceptable that the organization is not believing its employees. Any organization success is the result of group efforts.

Retaining their existing customers is always good and no one can stop the organization to add new customers, of course it will take some time to understand each other to enter the main stream. But it is not advisable to loose its existing good customers, otherwise it back fire.     

Dear Amrit,

This happens when company looses contact with its customer base. Change in product and process should be continual this does not require change of customer.

Keeping in touch with customer one forever has a better opportunity to learn demands and upgrade. In any case it is the word of existing customer most likely to succeed in getting new additions not expensive advertisements that may at best attract attention yet may fail to convert. 

No organization can survive without both. Customer retention enables an organization to maximize returns on the time and effort it has invested in that particular customer. On the other hand, new customers are like a shot in the arm.....it tells you that your product is still relevant in the space you are in. In short new customers (depending on the product) are like bulk income!! Retention provides recurring income!!!

I will have to say that a proper focus will be customer retention with an emphasis on acquisition of new customers. The relative proportion depends on the space your product is positioned in.

Now a days, it is the customer's testimonial or the clientele that speaks a lot about the company profile and services. We are moving towards services based economy than to a product based one so it becomes necessary to attract new customers while retaining the existing ones as many companies get repeat business as a result of improved services. It is very well said in marketing that it takes a lot of effort and cost to acquire a new customer.

For many of the industries like Telecom, Media, entertainment, Retail, rentention with CRM is the key to success. In these industries around 60%+ revenue comes from existing customers/repeat purchase. E.g VAS providers’ contribution to the total revenue of telecoms has been increasing from 2% to 10% in just 3 years. Customer Retention is Cost-Effective, but the Acquition is costlier than that. It doesn't mean that only retain the customers. Acquire and retain them with CRM.

Retention is not good strategy in some of the industries like automobile, electronics goods. But in this type of industies with retention and good CRM you can sell value added services easily to make atleast some %age of revenue.

new other is always a demanding one so spent much attention to those whome you already invested ur time and money

customer retention is very important,because existing customer works as a networking,it is only existing customer who brings new customer in business,besides it is very easy to convert the customer as he becomes loyal to the brand/company.so in short i think customer retention is very important than looking for new customer.

Suppose you have a restaurant people do visit frequently and always recommend to their friends. Most of your customer know you, praise you for your service,amenities etc. and you also gives them better and prior service than others !!!!

Question is, why is that so ?

Secondly, If the situation is vice-versa, than ?

 So ,Which among these two conditions you find best suitable ? First one which helps you to retain your loyal customer and helps you to find the new one through mouth publicity as well.

                                                          'OR'

The second one where you don't have a customer base ?

Dear Paul,

-When missing out repeat customers, the numbers may not be adding as they may be simply replacing the previous.

-Costs are saved when your repeat customer acts as your brand ambassador.

- Existing customer's word is most effective whenever compared to ad campaigns.

- Repeat customers guide you to broaden the basket on offer through demand.

I go for customer retention, see indian banking growth during last 3 decades, banks who have retained their customers have not only survived the financial crisis, but have shown growth during Q3 FY 2009-10. Retention process, indicates a strong process within the organisation, the process is transparent & is reviewed frequently.

In a young organisation focus of a organisation at initial stages should be towards customer retension, till a break-even point is achieved, thereafter the focus should increase towards adding new customers. Cos which have merged or have not survived during financial crisis are the ones who had neglected old customers.

from personal experience i have observed that my excisting clients with whom i have an extremely great relationship have actually given me  a  lot more new clients from my project. in my organisation we have an employee reference reward scheme  which has helped us get more customer walkins and conversions too, casue it helps tha the people who referred them to us is our client and that we have a great relationship with all our excisting clients and it reflects.

With my experience, I would say that the cheapest way to hang on regular business would be with customer retention, the reason being the client knows your product or service, the time & effort required in pushing your concepts or product would be too little, you already have a goodwill with the client or he has a previous experience with the product & the company, the time invested for retreving the business is smaller & the business would be confirmed, then time spend in exploring new client & taking chances.  Customer retention is the order of the day in business, company's should try building lot of related programs like CRM Programs, loyality programs etc in custokmer retention.  today customer retention is not that easy, the reason being the competitions are to heavy, the product differentiations are too narrow, hence companies have to find new ways exploring this segment of customer retention.

Going by my experience I feel that it is easier to grow your business by retaining your existing customers bring some value add into their business and look for referrals.

To this idea of Purvi and Shalabh's idea/comment on "parreto's law", I would like to add to support from perspective of LTV (Life Time Value) of customers.

I would not go into detail of the calculation of LTV here, but LTV of repeaters & loyal customers would be much greater than new or normal customers.  LTV is a good long-term metric of measuring ROI of customer acquisition and retention.

If you are innovative and progressing then it is better to retain a customer as progressive and innovative as you are, otherwise you need to look for new customers who could match you. So it should be always a blend of old and new. You can stop serving an old customer only when the customer sticks to old  resulting in his own collapse. Difine Old and New Customers properly in your objective? Old and new not by his length of association with you. It should be based on quality of products and serrvices.

Customer retention is the best and profitable way in business. Becoz if the current customers are happy with the company, they will spread the word to all their contacts.. 

I believe customer retention is a tough task compare to building up new customer. Retained customer are more seeker regards to new offerings, developments, infrastructure & extra reward. Retained customer create a word of mouth publicity, which is more effective & effecient way to advertise or position in the mind of new customers. They are helpful in both cases either to engage the new customer and help organization to increase the revenue.

Customers retention will automatically help the organisation to attract new customers. Now adays any new customer before using the products or services would like to check about the organisation. Hence, retention of satisfied customer is more important in this context, not mere customer retention. We require Quality customer retention rather than Quantity customer retention. The satisfied customer will automatically help into the acquisition of new customers by playing the role of PR for the organisation. It is a cyclic process, where we need to give more imporatnce to retention of customers. Word of mouth is a very powerful tools for marketing. Customers would love to hear from common man who had really experience the service or used the product rather than from some Brand Ambassador like M.S Dhoni, Ashwariya Rai, Deepika, Amitabh, Sushmita, Sachin Tendulkar, etc. The big question is do these Brand Ambassadors really used the product? Or they merely endorsed the product and get away with their amount of money?  

Better strategy is Customer retention rather than looking for new customers. We do not operate in a situation that there are unlimited customers and if we continue to follow strategy of acquiring new customers rather than retaining the acquired, eventually the satisfaction level will go down damaging the brand value and word of mouth will be a by-product making the brand unpopular. Retained satisfied customers often give repeated opportunity for business as well as a references to add to your kitty.

Remember that old customers will always give 40% of your new business. It is time proven. It is very important to establish cutomer loyalty programs, and strive for customer retention. Let your old customers feel that you are a part of their growth and business. In today's world of fierce competition in terms of product value, product marketing and product pricing it inevitable to be in touch with your old customers. Graduate them, nurture them and they will you help you grow. Yes you must add new customers but do not forget the ones who supported you on your way to the top. Unfortunately they are 'the' ones who might meet also on your way down. Customer retention is the key to any successful business.

Customer retention is the best strategy. Acquiring new customers is much costlier than Retention.

I think customer retention is very important for any company. It's not about the retention but also loyality towards your customer. Loyality is not impotant for share only but also for market share. These two factors automatically help in developing new customer in low cost.

A structure may not be able to withstand its own weight without a strong plinth.

First customers are like a plinth and building can only get desired strength with their support.

The forever New customer approach is good for runaways alone.

Actually it depends on what stage of the life cycle ur product is in. If it is a new product and there is a large untapped market share present in the market, then attracting new customers is the main strategy. But along with attracting new customers you would be trying to protect your existing market share by customer retention.

If your product is in the maturity stage and there is not enough market share up for grabs, then you would put all your efforts in retaining the existing customer base. 

But it is never a either/or strategy. You would need to do both at any stage. It is just the difference in the priority at different stages

I think both are equally important. Typically speaking from Business Development point of view it is important to have both New Customers & Retaining existing customer, as new customers ensure business accessibility and also successful address ability & Customer retention shows that customers are satisfied , that they have a  feeling that  company gives them respect.  New Customers means that customer are confident that the company can mark up to their satisfaction however for new customers, retaining of existing customers are very important as existing customers assist the market to have confidence on the company creating New customers.

Focusing more on existing customers doesn’t mean that you are completely ignoring new customers. Its just that you are prioritizing your existing customers to share your insights. You can call for idea sharing and this is how you can involve your existing customer base as well as get many lucrative ideas which will support you in long run. Many times existing customers drive new customers and can be a point of referral or suggestions and your one satisfied customer can benefit you in great detail.

I will vote for customer retention however I also like to have new customers on board. Everyone like it but the major focus should always be on existing stakeholders which is our existing customers. They are the one who actually paid off our bills and they should have to get priority and in other way one happy customer can bring many new customers so in this way you are satisfying your existing batch which is intern driving few new customers as well.

So, I reckon both the things need to take care but the priority should always be at existing customer's side.

Thanks

Expanding a bit more on what Purvi has mentioned;

Existing customers will always do that bit more because they have been completely satisfied with you and the team servicing them. You have the liberty of sharing a lot of things with them diplomatically and get that extra out which will benefit the company and self. While doing this, exploring the marlet for new customers is a sales team job anyway. It is extremely important to retain old customers.

In fact a lot of referrals from these customers can be used to identify new venues and explore them for business expansion.

When Mount Everest was not scaled, did people stop going to Kanchanjunga??? In fact it helped them overcome Mt Everest. So its the same strategy that you need to follow. Scaling Mt. Everest without scaling Kanchanjungs would be foolish right. So conquer the existing completely and then scale bigger heights!!  :))

In the present market senario acquiring new customers is very difficult though they are many. Retaining an old customer for the new changes in market is very easy.

Some comments for Coke concentrating on new generation.  It is attracting new customers but also focussing on existing youngers who are already customers.  Customer psychology is very different. How many people have changed their tooth paste, tailer, barber or even road side 'shoe polish'wala.  We tend to, if satisfied, continue with the same 'known devil is better than unknown devil' policy.  I feel retaining the customer is most vital point and clubbed with paying attention to development of new markets for new customers is added advantage to sales team.

In my opinion, every management authority on the circuit says that loyal customers and their repeat purchases are the cornerstone of your long-term successful business. The reason is obvious: it is less costly to get your existing customers to buy more than it is to find new ones. The lower cost of sale leads gives you higher operating margins, which you can then invest in other business building activities, and so it goes.