It never ceases to amaze me how organizations pour money into attracting new customers but spend comparatively little on customer retention. Everyone knows it costs far less to retain an existing customer than to use an expensive customer acquisition strategy.

Why, then, is there an obsession with acquiring new customers and such scant regard is given to existing customers when the cost is five times more? Let's examine the root cause of this customer retention and acquisition dichotomy.

A Current Experience: I Could Be Dead For All They Know

To illustrate the issue, let me share with you an example of a recent experience. While I work in London, England, I fly back and forth to the United States often. Needless to say, I quickly qualified for a frequent flyer's gold card from my preferred carrier of choice, Virgin Atlantic. About a year ago, our company established an office in Atlanta, Georgia, and I was now required to travel to this city for work. Unfortunately, Virgin did not offer direct service to the Atlanta airport, and I decided to switch to British Airways. I considered staying with Virgin and using an inter-connecting flight but decided the additional time that it would take was not worth it. I suppose that Virgin had not built enough loyalty with me to justify the additional travel time. As a result, Virgin has lost one of its most highly profitable upper class (business class) customers.

I expected something to happen after I stopped flying with Virgin - some type of contact or otherwise, but I've received no letter asking me why I am not flying with Virgin anymore, no automated email saying that the company had noticed a change of flight patterns, and no phone call from the gold members team. For all Virgin knows, I could be dead! If Virgin looked at my statement, it would show that I haven't flown anywhere in over a year. So, why hasn't Virgin even bothered to find out why? Here is the irony - I used to be a big Virgin fan, but as each month slips past, I am ignored, and I lose faith in the company. I now realize that I am not as important as I thought I was. If a gold card member is not important, then who is? Apparently, Virgin is spending far more money on a customer acquisition strategy than working to retain its existing customers.

Essentially, by Virgin's lack of action, the company is saying "we don't care." Its new customer acquisition strategy is to neglect its proven, loyal customers and focus exclusively on the new ones. Despite having all the data, Virgin can't be bothered to look at it. I am sure I am a statistic somewhere on gold card member behavior. Some marketing person has probably completed some wonderful presentations on whether flights are up or down from last year, but in the trenches, the company doesn't do anything to work for better customer retention. The devil is always in the detail. The company has been spending a great deal of money on a better customer acquisition strategy, including marketing to the upper class; however, integrating better customer retention into its program has not been considered at all.

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