Does content marketing help in customer retention? [Mathematical explaination]
Let’s face the fact: You don’t always need to search for new customers.
Instead, retaining the existing ones could be a much better option.
Here’s how:
On average, a company loses around 10–25% of its total customer each year.
Assume a hypothetical situation where a company called ABC acquired 1000 customers in 2019. Considering 20%, after 3 years the number of customers will down to 400.
Obviously, the number of customers will increase because the ABC company will keep investing in acquiring new customers every year.
That means every year, the company will lose X amount of customers and simultaneously gain Y amount of new customers.
Now, let’s see the same thing in terms of investment.
The study says that retaining existing customers is 5 times less expensive than acquiring new ones.
In other words:
If getting 100 new customers cost you $500, then retaining the same number of existing customers will cost only $100 (5x less than $500).
Sounds interesting. huh?
Here’s another point to consider (regarding churn rate).
Even if you’re acquiring 100 new customers in one year by spending $500, you’re also losing 200 existing customers the same year.
At the end of the year, the net number of customers = (1000–200 = 800).
Therefore, achieving a high customer retention rate would significantly boost the customer base. So, what is it so hard to retain the existing customer?
Usually, the problem is in the foundation.
Normally, companies generate leads from advertising by running a giveaway, direct mail, cold reach out, offering a lead magnet, free trial, etc.
A study shows that customer acquired without any discount has double customer lifetime value (CLV) as compared to customer acquired through a discount offer more than 30%.
(Source: Marketing management book)
Even after offering so much on your product, you’re getting less CLV, whereas without any discount people customers tend to get more loyal.
How does it possible?
It’s because most of the customers are more interested in the offers than the product itself. (Maybe that’s why Neil Patel is also not a fan of discount and offer)
On the other hand, any customer who goes through each stage of the marketing funnel* gets more loyal to the brand.
Strategically marketers try to extend the funnel so that they can get extremely loyal customers who are even advocating the brand.
This is where content marketing helps startups to fix their broken funnel.
In content marketing, the goal is to build a loyal audience that also becomes a repeating customer for a long time.
Another huge benefit is that you can easily optimize your funnel at any time.
Look at the below image for a better understanding:
The more stages your prospect goes through, the higher chances of turning that prospect into a loyal customer.
For instance, if the % of your customers who bought your product is much less than the number of people who have tried your product, then there is something wrong with the product or the customers finding it difficult to buy your product.
Likewise, you can dig down and check the leakage within your marketing funnel.
From the funnel conversion rate for each stage, you can understand what’s going wrong or what’s making it difficult for customers to move from one stage to the next one.
So what’s holding you back to leverage content marketing?
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