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Hi, let me take you now to the next step in this marketing and
strategy definition for marketing plan.
Remember, in the marketing strategy, we are trying to figure out first objectives.
We have discussed already objectives related to financial objectives sales,
profits.
We also discuss non-financial objectives.
So usually, more marketing of brand we did objectives and
now we're going to talk about costumer objectives.
Of course, as you know defining a marketing plan is actually
trying to get costumers and this can be actually a getting new costumers for
us or we came in some of the testing costumers.
This should be defined clearly in the marketing plan,
because probably we're going to allocate resources to attracting customers.
And probably at the same time,
we should be dedicating some resources to retain some of your existing customers.
So, that's basically what were going to discuss here.
What is more relevant?
What is the trend?
What should you do in your own marketing plan?
The strategic objective of your marketing plan is going to basically be to
open a decision tree again where on one side you're going to have customer
attraction and the other side, you're going to have customer retention.
Why do we separate this?
Because they are going to require probably different marketing actions and
actually we think carefully about the daily marketing that we see, and
receive as customers.
You can probably classify or split everything that you get,
either this is aimed to attract me as a customer or to retain me.
So basically, that's what we are going to do in your own marketing plans.
So if we take, basically, the objectives that we're going to find that most
of the actions that we do are related to attraction or retention?
What is more relevant?
What should be your objective?
Of course, it depends.
It depends on your marketing plan.
It depends on the business that you're working for.
It depends of the brand that you're managing.
Let me take you a little bit to analysis on what was going on
today in the industry.
Today, it seems to be a clear trend towards moving resources
from attraction to retention.
Why is this?
Well, let me give you some reasons.
First reason, attraction is expensive, very expensive.
Acquiring a customer is actually way more expensive than retaining an existing one.
How more expensive?
Well, it depends on the figures that you look at.
But five, six, seven times more expensive could be a figure.
So, attraction is expensive while retention maybe is not so expensive.
What are the implications of this?
Well, when attraction is so expensive, you need time,
you need to retain the customer for some time to recover your investment.
So retention becomes very relevant,
especially because attraction is expensive.
Here, we have some examples of industries where attracting customers is
very expensive.
You probably know that, I don't know, the mobile industry is well-known for
having a very high customer attraction cost.
Why?
Because they spend a lot of money.
Spend money advertising to spend money in subsidizing terminals.
They spend money in paying commissions to the channels, so
they end up paying a lot to get a customer.
So, they need time to recover the investment.
They need the customer to be with them for some time,
at least to recover the investment and make some more money.
Another example, when we compare the effect of an increasing retention in
different industries, we see that some industries are a huge effect
if we just increase a little bit the retention.
That's why putting results in retention makes sense.
I have here another example, which is very common from the hotel
industry were basically they segment the market into light traveler,
medium traveler and frequent traveler.
What happens in this industry and is very common is that there's a small
portion of frequent travelers generates most of the industry revenue.
So basically, what happens is that you should try and keep your share of
the frequent traveler, you need to retain your frequent traveler share,
because most of the money, most of the revenues of the industry are there.
That's another reason for putting resources in retention.
More examples,
I have another example from the Starbucks coffee shop that you all know probably.
Where once again, we see the small number of customers that are actually very,
very frequent users of the product very, very loyal customers.
Generate most of the transactions.
And of course, most of the profit.
Once again, you need to retain them.
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Another reason for putting resources in retention
is that it always takes time to recover the investment.
So, put marketing money to attract the customer and then we need time for
the customer to actually repay the money that we're putting there.
How long?
Well, it depends on investment, it depends on investment.
We're saying in the mobile industry, probably they say, between 14 and
17 months.
Otherwise, you don't recover the investment.
So it's going to follow a curve and there is a moment where you break even and
until that moment,
you need to retain that customer at least to recover your investment.
So, that's one more reason for putting resources there.
Another example, the credit card industry.
Year one, they lose money, because it is paying a lot of money marketing and
actually in paying commissions to attract new customers.
But once the customer is there, they make money and they make a lot of money.
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Another reason and that's the last one is because many times we are in
the later stages of the life cycle of the brand.
So, that's another reason for
putting resources in retention instead of attraction.
So, what should be your customer objective?
It depends.
It depends on your own situation.
It depends on your own product.
It depends on the state in the life cycle.
What I'm trying here to highlight is that today with modern resources clearly from
attraction to retention, probably lessons that we've mentioned in, maybe it's your
case or maybe you're just at the beginning of your new product introduction.
In that case,
you should be putting resources into attraction instead of retention.
So, final idea about this part is basically define what should be
the resources that you're going to dedicate to attraction versus retention.
Thank you.
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Ramon Diaz-BernardoAssociate Professor
