Why B2B Marketers Should Focus More on Existing Customers

Most of the recent research, literature, and conversation about B2B marketing has focused on its role in building brand awareness and acquiring new customers. Less attention has been given to the critical roles that the marketing function and marketing content should play in sustaining and enhancing relationships with existing customers.

For decades, business and marketing thought leaders have touted the importance of creating and maintaining strong relationships with existing customers. Research studies going back to the early 1980's have repeatedly shown that it's more expensive to acquire a new customer than it is to retain an existing customer.

In the early 1990's, Don Peppers and Martha Rogers popularized the importance of understanding customer lifetime value and of competing for share of customer rather than overall marketing share in The One to One Future. In 1996, Fred Reichheld showed that creating loyal customers drives higher profits and shareholder value in The Loyalty Effect:  The Hidden Force Behind Growth, Profits, and Lasting Value.

But despite the long-standing recognition that retaining customers is vitally important, recent research shows that many companies are still under-emphasizing customer retention in their marketing efforts. For example, in a 2014 survey by Forbes Insights, only 38% of respondents said their company is primarily focused on existing customers for revenue growth, while 49% said their company is still focused primarily on acquiring new customers. Seventy-nine percent of the respondents to the Forbes survey said that customer lifetime value (CLV) metrics are valuable in their planning, but only 58% said they regularly calculate CLV.

In reality, managing relationships with existing customers is more important today than ever before. Astute business leaders across virtually all industries now recognize that delivering outstanding customer experiences - both before and after the initial purchase - is paramount to competitive success. Last year, research by Gartner found that 89% of companies expect to compete mostly on the basis of customer experience by 2016. And Walker Information recently wrote that by 2020, customer experience is expected to surpass product and pricing as the key business differentiator. (Customers 2020:  The Future of B-to-B Customer Experience, Walker Information, Inc., 2004)

Relationships with existing customer are also becoming more important because of the growing popularity of "subscription" business models. With a subscription model, companies offer their products as services rather than physical objects. For these companies, the economic value of a customer is realized in installments, over time, instead of at the time the initial "purchase" is made, and customer profitability depends largely on the length of the customer relationship. Subscription based businesses are now found in a wide range of industries, including media, entertainment, computer storage, and both personal and business software.

In several other types of businesses, most customers make multiple, independent, and relatively small purchases over time. For these companies, maintaining strong relationships with existing customers is just as important as it is for subscription-based businesses.

The bottom line is that most B2B companies should be paying more attention to strengthening relationships with their existing customers, and B2B marketers should play a leading role in those efforts. In a future post, I'll discuss how marketers can develop content that will help nurture and enhance relationships with current customers.