In heavily Spanish-accented English, Francisco emotionally said, “I have to keep my people”. His “people” are the many homeowners that he, his wife and grown sons serve in their lawn care business. Francisco may not have all the facts presented in this article, but he sure knows the critical importance of customer retention.
Many small/mid-size business owners and professionals in private practice are so focused on business development that they ignore the need to retain the customer base they already have. And yet there is plenty of research out there that dramatically demonstrates it is far easier to sell to existing customers than to convert prospects to clients. As a matter of fact, it is 50% easier according to Marketing Metrics.
Now add to that mix – when you retain a customer, you enjoy the potential of their lifetime value … the revenue and profitability of the relationship over an extended time plus their power to influence other potential customers to do business with you.
Revenue & Profitability
So, what’s the bottom-line value of customer retention? As published in the Harvard Business Review, a Bain & Co. study astoundingly reveals that increasing customer retention rates by 5% increases profits by 25% to 95%!
Additionally, research by John Fleming and Jim Asplund, shows customers that are “engaged”, meaning satisfied, generate 170% more revenue than ordinary customers who are not emotionally in touch with your product or service. And when both customers and employees are engaged, the win is a revenue gain of 3.4 times the norm. That certainly underscores the need to be customer-centric.
There are many formulas to determine lifetime customer value. Here’s an easy way to calculate courtesy of The Sweet Tooth Blog.
Influence On Potential Customers
Your ability to attract new customers is not only related to your product and service offerings. It is strongly related to the way you service your existing customers and the reputation you create for your enterprise in the marketplace.
Lee Resource, Inc. delivers a revealing statistic. Attracting new customers will cost your company 5 times more than keeping an existing customer. Keeping an engaged, satisfied customer that also refers business to you is an awesome asset that must be attended to and nurtured.
Customers Don’t Owe You Their Loyalty. You Have to Earn It!
Not only that, you have to earn it continually. It is a process not a one-time event. That said, here’s a 5-step approach to hone an effective customer retention program.
- Start With Your Employees
A study published by The Forum for People Performance and Management & Measurement found that:“There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and improved financial performance.”
In answer to the question, “Why do customers leave a company?” KissMetrics tells us that 68% leave because of the treatment they received.
Lesson: Even if your employee base is you alone, know that it is an organization’s employees who influence the behavior and attitudes of customers. Treat ‘em Right!
- Encourage Customer Feedback
… and Listen, Listen, Listen … and then Act. In one study, it was shown that 80% of companies surveyed said that they offer superior customer service, but only 8% of their customers agreed with them. Ouch!Make it easy for customers to respond through brief customer service surveys. Provide some incentive to respond as well … a discount or be entered in a gift drawing. And, of course emphasize and motivate your employees to be alert and report customer feedback as soon as it is voiced.
- Communicate With Your Customers
Here’s where there is plenty of opportunity. In this grand age of technology, you have the classical as well as the state-of-the-art media at your fingertips. Here are just a few vehicles to consider, or better yet, employ them all.Social media: For B2B businesses, LinkedIn is a must. B2C enterprises find Facebook a must-have vehicle. Then explore and experiment with Twitter and others as they come along
Newsletters … are a perfect communication tool. Be sure to deliver valuable information that will be perceived as useful to your audience and position you as a thought leader and industry expert.
Never a sales pitch! Having said that, one of our customers reported that when we published their first newsletter, he received several calls of praise – two of which resulted in additional business. Why? Because the newsletter didn’t “sell” but did feature a listing of all services which the now “repeat customers” were not aware.
Cards: A thank-you and a birthday remembrance are always well received. Do this regularly. You will distance and differentiate yourself from the competition.
- Show Your Customers They Are Valued
– Offer frequent promotions to keep your customers actively engaged with your brand.
– Personalize your correspondence, newsletters, emails, etc. by including your customer’s name.
– Customize your offers to customers based on their behavior on visits to your website and purchase history.
- Track & Test
The old adage, “If you don’t follow up, you will foul up”, is of particular importance in your customer retention campaigns. How you monitor the performance will be dictated by the methods you employ. Be sure to monitor results and fine-tune as necessary to maximize your effectiveness.
One last thought. There is plenty of ammunition in this article to make a case for being assertive and proactive in your quest for customer retention. Go for it!
If you don’t actively pursue customer retention, you will achieve customer attrition.