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  • Jo Evans

The Leaky Bucket: Acquisition v Retention

Updated: Oct 19

The Leaky Bucket may sound like a pub in the Harry Potter books and films, but it’s an analogy you should be aware of as a business owner.

Often businesses lose sales through a constant obsession with finding new customers. New customers are offered incentives in the form of discounts; often huge “carrots” to get them in through the door. Then, as the Nationwide ad used to say, they are thrown in the keep-net and forgotten about.

You may be aware of Pareto’s 80-20 rule. Basically, it states that 80% of your sales come from 20% of your customers. It’s those 20% that are often forgotten about in the drive to find (or poach!) new customers. But, it’s those 20% you need to identify and keep a firm hold of through “retention campaigns”

Marketers often use the “leaky bucket” analogy. If all your customers are leaking out of the bottom of your bucket, then you are wasting money on “acquisition” campaigns – throwing new customers in the top, only for them to fall out the bottom.

According to a report by Frederick Reicheld of Bain and Company, acquisition campaigns to obtain new customers can be 5 to 25 times more costly than retention campaigns to existing customers, due in part to the fact new customers have no loyalty and soon disappear off elsewhere. Something to consider when working out how to boost sales.

The report also highlights:

  1. Over a 5 year period, customer attrition rates (the amount of customers lost) can reach 50% in a dormant database.

  2. Businesses who raised their customer retention rates by only 5% saw an increase in their sales of up to 95%!

So, don’t just go on the hunt for “fresh blood”, contact us! We can plan the best ratio of acquisition v retention marketing strategy to maximise sales for your business and some clever ideas for how to get your existing customer base to not only stay with you but spend more.

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