Retail surgery: We have focused on retaining the profitable customers on our database, rather than acquiring new ones. How do we get the balance right?

Many retailers focused email marketing on retaining profitable customers through the recession. But Simon Bowker, UK managing director at digital marketing specialist eCircle, says: “Retention is not just for recession. The return on investment for retention - when you take into account cross sell, up sell and customer lifetime values - should make this a no brainer. That said, we can’t fill all the holes in the bucket and most organisations have growth targets that simply can’t be met with pure retention.”

He advises improving the quality of leads by getting a good understanding of who your best customers are and combining that with an understanding of which acquisition channels are most cost effective - to focus on quality rather than quantity.

Some analysis of the recency, frequency and value (RFV) measure should form the basis of this segmentation, and don’t stop at cost per lead but rather aim for longer term metrics of customer lifetime values, or at the very least cost per sale.

He adds: “An effective channel to gain new customers is through your existing customer base. ‘Refer a friend’ or ‘Member get member’ programmes that utilise the advocates already in your customer base should play an important role.

“According to Nielsen, 90% of consumers trust product recommendations from people they know, and 70% trust opinions of unknown users. Give loyal customers the chance to review your product and they will have a significant impact on acquiring new customers.”