Kevin Hillstrom: MineThatData

Retention vs. Acquisition Budget

On LinkedIn, an intrepid reader asked a question.

"If cash is tight, how do I decide the percentage of my marketing budget to spend on acquisition vs. retention?"

This is not a Lemonheaded question ... this is an earnest question, one we'll answer every day of the week. What would a Lemonheaded question look like?

"Should I even bother to spend money on acquisition when cash is tight and we all know that loyal buyers are nine times as profitable as are customers we're trying to acquire?"

Notice the difference?

Your marketing budget should not be divided between acquisition and retention. Your marketing budget should self-determine itself based on the profitability of your marketing efforts.

If an acquisition activity generates profit, you should continue to execute the tactic.
If an acquisition activity is unprofitable, you should continue to execute the tactic if the acquired customer makes up the loss within "x" months, with twelve (12) months being a common limit.

From here, your acquisition marketing budget self-calculates. You know exactly how much to spend.

If you don't have enough money to spend on acquisition activities, sit down with your Chief Financial Officer, do your homework, and state your case. If most cases, your CFO will be willing to spend the money because you were able to demonstrate adequate return on investment.

Year of Acquisition

In some projects, I'll look at the year loyal customers were acquired. The results are always fun to analyze!

10% from 2021 - 2025.
40% from 2016 - 2020.
25% from 2011 - 2015.
15% from 2006 - 2010:
12% from 2001 - 2005:
8% from 2000 and earlier.

65% of loyal buyers (in this instance) were acquired 6-15 years ago.

Which means the success of the Retention Marketer came from the success of the Acquisition Marketer (who doesn't even work at your brand anymore) 6-15 years ago. If the Acquisition Marketer doesn't do her job 10 years ago, the Retention Marketer doesn't have work to do.

Am I saying that Retention Marketing is worthless?

No.

I am saying that Retention Marketing is dependent upon Acquisition Marketing. I am saying that the vast majority of readers should spend FAR MORE time focusing on acquiring customer than keeping customers.

The health of your business depends upon it.

Their Rules Do Not Apply To You

A lot of Thought Leadership on LinkedIn about the final days of Stranger Things on Netflix over the past few days.

LinkedIn Thought Leadership Thesis (#LTLT):

Stranger Things is a Success.
Netflix Marketers are Brilliant.
Making The Customer Wait Three Years For Season Five Creates Excitement, Interest.
Spreading The Final Season Out Across Five Weeks Is Smart.
FOMO, Fear of Missing Out, Creates Shared Experiences.
Build Anticipation, Then Have A Massive Payoff.
Retention Marketing (Catering To Your Best Customers) Is Much More Profitable Than Acquisition Marketing. Stranger Things Proves This Fact To Be True.
The Reason Your Brand Struggles Is Because You Don't Focus On Retention Marketing And Your Marketing Team Isn't As Smart As The Team At Netflix Is.
Do What Netflix Does.

I don't have enough hours in the day to respond to this drivel.

First of all, Netflix is selling Stranger Things Season 5. You are selling Widgets. Who has a harder job? You do! It's not even close.

Stranger Things Season 5 is not proof of anything, much less the myriad brilliance of Retention Marketing. Well, let me take that back. If anything, Stranger Things Season 5 is proof of the importance of acquiring customers to the Stranger Things franchise in 2016. Yeah, think about it. How many people watched Stranger Things in 2015? None, it didn't exist. The franchise had to acquire viewers in 2016, those viewers spread the word organically, and the marketers at Netflix did a ton of very challenging viewer acquisition work in 2016 that pays off today. If the franchise stunk (i.e. bad merchandise), it would not exist today. The product had to be compelling, viewers had to try it out, viewers had to tell friends how wonderful the series was, and from there viewer acquisition led to a success story. It was viewer acquisition from nine years ago that #LTLT should be talking about, because without the hard work done by creative/marketing people nine years ago, retention tactics are meaningless today.

Every customer you love marketing to today had to be acquired yesterday.

By the way, do you have $400,000,000 to $480,000,000 of petty cash lying around to spend on Season 5 of a decade-long franchise? Retention Marketing is easier when you have the GDP of Tunisia at your disposal. You don't have those resources at your disposal, do you?

Another fundamental difference between Stranger Things and your Widgets business?

Stranger Things Ends on Wednesday.
Your Business Is a Going Concern ... You Sell Every Day Forever As Long As Profit Allows You To Sell.

It is easy to prime the pump for something that fifty million or a hundred million people have watched, something that will end in a few days.

It is amazingly, terrifyingly hard to show up for work every day and somehow convince people that they should buy a widget and then they should pick you over every other widget provider for said widget. Honestly, Stranger Things marketers are working in Hawkings, the widget marketer is working in the Upside Down, trying to stave off Vecna. Every day.

It is easy to talk about Retention Marketing, which is why so many people put us on blast mode about it.

It is not hard to convince a Starbucks customer to purchase five drinks a week instead of four drinks a week.

It is hard to Acquire customers. Very hard.

It is VERY hard to convince a coffee drinker who has said "no" to buying from Starbucks for two decades to try Starbucks for the first time.

Content-based Retention Marketing rules do not apply to your business. Your job is so much more difficult. Which is why some people talk about retention marketing on LinkedIn while you work so darn hard to keep the wheels on the widget bus.

Here's One For You

You won't find a single Lemonhead in this entire 17 minute documentary about Dads who take their daughters to a Taylor Swift concert in Los Angeles. As YouTube user @lnsyderloser said "This might be the most wholesome doc I've ever seen".

Extra credit to the Dads who didn't go to the concert and sat in their car for several hours.

Merry Christmas!!

Been posting this image for nearly twenty years ... no need to change, right? Wait, I'm always asking people to evolve. Oh oh.

That was my young corgi at the time (his name was Bert, and he was 14/10 on the Dog Rates scale). He had a problem with crows.