RMIT International University Vietnam COMM 2384 Client Management

Final Individual Assignment

Do Nguyen Khanh Vy _S3246653
Instructor: Allyson Keane
17 May 2011

Client acquisition is a higher priority than client retention. Discuss both sides of this statement and state which is more important in your view and why. In your discussion, make reference to a minimum of three (3) strategies discussed in any of the lectures, assigned readings, group reports presented in this course and your wider research. Introduction The battle between client acquisition and client retention has generated many concerns form both agencies and clients sides. It is stated that client acquisition is a higher priority than client retention. However, client retention is considered as a better strategy for the agency to increase its financial profits compared to client acquisition. Therefore, this paper will first provide basic definitions of both client acquisition and retention. Following that, a deep analysis demonstrating client retention is a higher priority than client acquisition will be examined. Client Acquisition According to vCustomer Corporation (n.d), client acquisition is a process of gaining new clients in order to increase the bottom line of an agency. The client acquisition process includes identifying the right target market and prospects, implementation marketing and sales campaigns to increase the customer base. Client Retention Client retention is the relationship maintaining process with an existing client that will lead to continuous business cooperation (vCustomer Corporation Co n.d). This process concentrates on providing better customer services and developing strategies for current clients. Client retention is a higher priority than client acquisition. Grion (2003) stated that client retention has become more popular during the last few years. Retention is set as a high priority at many organizations due to its simplicity as well as the promise of high financial return. Based on the report of vCustomer Corporation (n.d), increasing costs, enhancing negative publicity coupled with losing high value clients are the three primary negative outcomes that the agency will receive in case it focuses on client acquisition and neglecting current clients. Waterfield (2006) asserted that client retention has a primary influence on cost, income and the whole financial performance of the agency. It is agreed that increasing

retention is more and more vital because the existing clients not only contribute to generate significant revenue for the agency, but also have less sensitivities to prices compared to new clients (Grion 2003). The statement it costs five times more to acquire a new customer than to retain an existing one (Grion 2003, pp.30) demonstrates that client retention is considered as the key strategy for the agencys development and success. In addition, according to Waterfield (2006), clients vote with their feet, which illustrates that when the agency chooses to retain current clients, and those clients also decide to continue cooperating with the agency, the benefits come to the agency are more valuable. It strongly demonstrates that the current clients are satisfied with the services they are receiving, and the agencys reputation and image are enhanced due to this satisfaction. Furthermore, client retention not only has a strong impact on current financial statement, but also influences on the future revenue of the agency. Urquizo (2006) asserted that strengthening the clients loyalty greatly contributes to maintaining stable future revenue. Mathew Underwood, who is a Managing Director of Matterhorn Communications, intimated that client retention develop loyalty and trust between the agency and its clients. Financial profits obviously play a vital role in running a business. Nevertheless, building trust and sustaining a relationship will turn that financial statement become stable and developing. Trust and being trusted are the two major elements in maintaining a good relationship. In the tutorial providing information about Customer Relationship Marketing (CRM) and others concepts, developing of trust is one of the perspective for further relationship marketing. Successful communicators develop a strategic process, and have to ensure that the process can satisfy the needs of target public. Once the customers feel satisfied with provided services, they believe that the agency is greatly contributing and help them achieve success. Following the client relationship ladder in the Client Acquisition lecture, trusted partner is in the highest position when enhancing relationship with existing clients. Therefore, it can be seen that building trust is an important strategy that any agency has to invest whenever in the situation with existing clients or new clients. And that trust is significantly enhanced if the agency considers client retention as a higher priority. Akhil Malhotra, who is currently in charge of Business Director from COWAN, in a guest speaker section indicates that Existing clients can refer you to new ones. As any marketer agrees that word-of-mouth publicity is the most effective campaign in order to attract more

clients (vCustomer Corporation n.d). It leads to converse consequences if unsatisfied clients release and generate negative publicity. Thus, it can be considered that more negative word-ofmouth can be widespread by one unsatisfied customer compared to positive word-of-mouth revealed by a satisfied one. According to vCustomer Corporation (n.d), one unsatisfied client has an ability to deliver their negative experience and feedback to more than 800 potential clients. Therefore, building and sustaining good relationship with current clients can help the agency not only gain financial profits but also attract more new clients via the reference of current clients. The agency already build a trust with client through retention, hence it does not take a long time to build that trust with the potential new clients. That trust has been built when the existing clients introduce the agency to the new clients. As a result, the agency is in the win-win battle since it can provide services for both existing and new clients. From these above arguments, it can be seen that client retention is a higher priority than client acquisition. It does not emphasize that client retention is the only strategy that any agencies need to execute and ignore client acquisition. Entirely focus on retention client might lead to losing on increasing market share with respect to new clients. Hence, it would be more effective if the agency considers client retention as the first step and client acquisition as the second step in the process of increasing financial profits and market share. Conclusion In summary, client retention is a higher priority than client acquisition due to its promise of stable financial statement, enhancing trust and loyalty with current clients coupled with saving time to attract and building trust with new clients through existing clients reference. It is recommended that the agency should take client retention as the first strategy and client acquisition as the following step in order to succeed in the market. (1025 words)

References: Grion, RS 2003, Rethinking Customer Acquisition Before Talking Retention, Journal of Integrated Communications, pp.29-33. Urquizo, J 2006, Improving and Monitoring Customer Retention, Microcredit Summit, November, pp.1-35. vCustomer Corporation n.d, Customer Retention vs Customer Acquisition, pp.1-6. Waterfield, C 2006,The Challenges of Measuring Client Retention, The SEEP Network, June, no.2, pp.1-28.