The Economics
Let’s do some simple analysis to understand the financial gains from Attention Messaging. The specific numbers will likely differ from brand to brand, so treat these as directional and indicative.
Let’s say a brand has 100 customers. The cost of a new customer acquisition is Rs 100. A new customer has a 20% probability of becoming a loyal customer. Non-loyal customers stay for 24 months. Thus churn is about 40% a year, or just over 3% a month. Assume the brand spends to re-acquire a third of the churned customers. The cost of messaging to an existing customer can be taken as 50 paise per month – across emails, SMS and investments in martech software which enables analytics, engagement and push notifications. What I have not factored in is the cost of labour (in-house and at agencies).
Based on this model, we can come to the following conclusions:
- At the start, the brand has 100 customers
- At the end of the year, churn will bring down this base to 60 customers
- Assume it acquires 50 new customers each year and re-acquires 13 churned customers
- This the brand spends Rs 100 x 63 = Rs 6300 to grow its customer base by 23
- The 50 paise spend per customer per month can be split this: 10 emails x 1 paise and 3 SMSes x 13 paise
- Thus, the brand spends Rs 6 x 100 = Rs 600 on retention annually
- To summarise: the brand spends 10X more on new acquisition then it does on retention
Now, let’s bring in Attention Messaging.
- The brand sends 10 new Ems for branding at a cost of 10 paise additional per month
- Let’s assume the brand offers 10 paise as rewards per open and assume 50% such messages are opened
- Thus the total cost comes to 60 paise per customer per month
- The brand converts 5 emails and SMSes (of the 13) into microns and offers rewards of Re 1 in each of them for specific actions (opens, clicks, preference info) which doubles open rates from 10% to 20%
- Thus, the additional spend will be 5 x 20% x Re 1 = Re 1 per customer per month
- Taken together, Ems and Microns will cost Rs 1.60 additional per customer per month
- In a year, the brand thus spends an additional Rs 19 per existing customer
- Combined with the Rs 6 being spent earlier, the total retention cost is Rs 25 per year
- Of this Rs 25, about Rs 18 is being ‘returned’ to the customer as a reward for attention
So now, we can compare the costs of retention and reacquisition. Retention costs Rs 25 per customer per year, while reacquisition costs Rs 100. Combined with the fact that an existing customer is 3-10X more likely to make a purchase, the RoI on retention for a brand is 12-40X by focusing.
The budget to fund retention is hiding in plain sight. Instead of a 90:10 acquisition:retention split, marketers need to make it 75:25. This will make for happier customers (they are being rewarded for their attention), drive greater engagement (more attention = more opens/clicks and thus more transactions), and reduce churn (attentive customers are less likely to become dormant and inactive).
Attention Messaging is an absolute no-brainer! It’s the best RoI secret for attentive marketers!!
