Extreme Retention = Profit-centric Marketing (Part 1)

Marketing’s Wrong Turn

During my recent US visit, I met a friend who has been very active in marketing for a long time – as a professional and then as a professor. I browsed through some of her older books – a curated set of titles linked with her interests. Here is a glimpse of the collection:

What struck me was the focus on customer loyalty. This contrasts with the focus today on themes like digital advertising, performance marketing and social media marketing. Of course, the customer has changed – very digital and very targetable at an individual level. Yet, I could not help feeling that in the relationship that marketers are building for their brands with customers, something went wrong in the past decade.

Marketing’s wrong turn has been about an extreme focus on customer acquisition via adtech platforms. The likes of Google and Meta (Facebook) made it so easy to spend money targeting and acquiring new ‘customers’ that marketers went overboard on the future (new customers) and forgot about the present (existing customers). They have missed (or deliberately overlooked) the fact that half of their spending is being wasted on reacquisition and wrong acquisition. They have hurt their employers by ignoring retention and fostering loyalty, and instead focused on the shiny and new digital customers who click through and then sometimes vanish into a black hole.

Businesses are paying a huge price for this. When the revenue generated by the adtech platforms goes up 30-40% a year (about $50 billion in 2021), that money is coming from brands participating in an unwinnable race and cutting into their profitability pool. This may have been less of an issue in the past few years with free capital from investors hungry for topline growth. As a slowdown approaches and capital becomes scarce, the focus will necessarily have to shift to profits and free cash flows being the only oxygen for growth. CEOs will then be faced with two tough choices: cut employee costs or reduce marketing costs. This series is about helping leaders make the right decisions and correct marketing’s historical mistakes with the idea with a focus on what I call “extreme retention” (XR) is at the heart of “profit-centric marketing” (PCM) by eliminating the profit killers and bringing in the profit creators.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.