Boost Your ROI: Why Brands Should Prioritize Retention Over Impression Channels

In the current digital marketing landscape, brands are heavily investing in impression channels such as TikTok, Pinterest, Facebook, and YouTube. While these platforms are excellent for increasing brand awareness, there’s a growing concern that companies are overlooking a more profitable avenue: customer retention. By shifting focus to retention channels like loyalty programs, brands can achieve a higher overall Return on Investment (ROI) and foster sustainable growth.

The Overemphasis on Impression Channels

Recent data on the Netherlands and the UK highlights a significant increase in advertising budgets allocated to impression channels:

• TikTok: a staggering 75% increase in ad spend
• YouTube: over 32% increase
• Pinterest: still an impressive 31% increase
• Facebook: a solid 15% increase

These ad-platforms are attractive because they offer vast audiences and engaging formats. What brands increasingly realize is that the competition is fierce, which leads to strongly escalating costs for ad placements and therefore on an increasingly diminishing returns on investment (ROI).

The Untapped Potential of Retention Channels

While brands pour resources into attracting new customers, they often neglect the goldmine of opportunities within their existing customer base. And that is what baffles us. It’s quite simple to increase ROAS if marketers are prepared to define ROAS just a bit smarter and include loyalty as a channel. Here’s why retention channels deserve more attention form this perspective:

1. Higher ROI Through Loyalty

• Cost Efficiency: Acquiring a new customer can cost five times more than retaining an existing one.
• Increased Spending: Loyal customers are likely to spend 67% more than new customers.
• Repeat Business: The probability of selling to an existing customer is 60-70%, compared to 5-20% for new prospects.

2. Enhanced Customer Lifetime Value (CLV)

Retention strategies boost CLV by encouraging repeat purchases and fostering brand advocacy. This not only increases revenue but also builds a stable customer base that can weather market fluctuations.

3. Valuable Customer Insights

Loyalty programs provide rich data on customer preferences and behaviors. These insights enable brands to personalize marketing efforts, improving customer satisfaction and further increasing retention rates.

Why Loyalty Programs Outperform Impression Channels

Personalization and Engagement

Loyalty programs allow brands to create personalized experiences that resonate with customers on a deeper level. This contrasts with the broad approach of impression channels, which may not always effectively convert interest into sales.

Building Trust and Brand Advocacy

Retention efforts strengthen the customer-brand relationship, fostering trust and encouraging customers to become brand advocates. Word-of-mouth recommendations are invaluable and come at no additional marketing cost.

Sustainable Growth

Focusing on retention leads to sustainable, long-term growth. While impression channels may provide quick wins, loyalty programs build a foundation for ongoing success.

Balancing Acquisition and Retention

This isn’t to say that impression channels should be abandoned. Instead, brands should aim for a balanced marketing strategy:

• Use Impression Channels to attract new customers and increase brand visibility.
• Leverage Retention Channels to maximize the value of existing customers and improve overall ROI.

Actionable Steps for Brands

1. Implement a Robust Loyalty Program

Develop a program that rewards customers for their continued patronage. This could include points systems, exclusive discounts, or VIP experiences. VEMT can create a unique program, tailored to your brand.

2. Analyze Customer Data

Use the insights gained from your loyalty program to tailor your products, services, and marketing efforts to meet customer needs more effectively. Use our AudienceBuilder to check that box.

3. Reallocate Marketing Budgets

Consider shifting a portion of your advertising spend from impression channels to retention strategies. Monitor the impact on ROI and adjust accordingly. We promise you won’t be disappointed. Ask us for cases.

4. Foster Community Engagement

Create platforms for customers to engage with your brand and each other. This enhances the customer experience and strengthens brand loyalty. We have some examples for you.

Do it now for a stronger ROI tomorrow.

Brands investing heavily in impression channels may see immediate spikes in visibility, but without equal emphasis on retention, they definitely risk missing out on higher ROI and long-term growth. By prioritizing customer retention through effective loyalty programs, brands can capitalize on existing customer relationships, reduce marketing costs, and achieve sustainable success.