Focusing on Customer Retention

Nashville Business Journal – Sept. 2007
by John Boyens

Let’s start with a few universal truths about keeping customers:

• It costs a lot less to keep an existing customer than to get a new customer.  Research shows that it costs nine times more to get a customer than it does to retain a customer
• It can take 18 to 24 months before a customer becomes profitable.  Given marketing costs, sales costs, training costs and ramp up time most companies need 18 to 24 months of purchases or revenue to “break even.”
• Retention is very different than Renewal.  One big mistake companies make is to track (and in most cases compensate) customer renewal rates versus customer retention rates.  Renewal focuses on dollars (or contract amount) while retention focuses on the number of customers.  If a company does a good job on retention it is easier to cross-sell and up-sell existing customers (versus selling new ones) which lowers your cost of sale and at the same time grows your revenue stream.

If you visit your favorite search engine on the web and type in the phrase “Customer Retention” you’ll find over forty-seven million possible links.  If you visit your favorite bookstore there are literally thousands of books on Customer Satisfaction, Customer Loyalty or Client Satisfaction.  Phrases such as client-centric or customer-focused have been added to our vocabulary.

Isn’t the goal of any business to create loyal customers who want to use their services, try new services and provide referrals? Retaining customers requires the customer to be satisfied with the service, the product and the experience. The purpose of this article is to share with you some “best practices” from other successful companies to help you improve your customer satisfaction which will lead to increased retention!

Small improvements in retention can produce sizable benefits, which is why effective salespeople always focus on retaining the customers they have. It’s been estimated the cost to land a new account is as much as six to nine times the cost to retain an existing one. Not only does retention reduce costs, it boosts your productivity by allowing you to spend more time servicing your customers to grow your revenue.

Let me highlight ten of the most common customer service mistakes:

1. Having an untrained staff
2. Trying to win the argument
3. Not being accessible to your customer
4. Defaulting to your “policy”
5. Not living up to your promises
6. Not remembering your customer’s name
7. Giving customers the runaround
8. Not listening to your customer
9. Forgetting to say “please” and “thank you”
10. Failure to manage expectations

How many of these customer service mistakes has your company and/or your salespeople made in the past three months? So what can be done about it?  Here is a list of seven secrets to keeping customers:

1. Know your customer’s business: What makes them unique? What products/services do they sell?  What markets do the cover?  Who are their competitors?
2. Deliver flawless results: To establish long-term customers’ relationships it is critical that you flawlessly deliver every benefit and value you promise. That is the key to a customers respect, trust and loyalty.
3. Develop a proactive plan: Understanding your customers business and doing first-rate work are essential for creating a loyal clientele. But there’s more. You must also develop a proactive, customer-specific plan that articulates how you will retain and grow your customer base.  Without a plan, you’ll drift from project to project, relying mostly on luck.
4. Uncover “needs:” To retain customers, you must focus on customer satisfaction. Rather than just making a sale and then moving on to the next customer, savvy sales people are turning themselves into “account managers” rather than just salespeople.
5. Manage expectations: You need to manage expectations. This means from both a positive (proactive communication) and negative perspective.  Let me give you an example.  Customers with unrealistic expectations of what they want and/or what you can deliver will never be satisfied. They’ll just waste your time and then ultimately take their business elsewhere.
6. Keep your name in front of your customer: Maintain communications. Reach out to the customer four times a year at a minimum. Call them, drop by, take them to lunch, etc.  Make sure you use technology (i.e., email, video email, etc.) to proactively manage your customer contact
7. Assume nothing: No matter how good you are, never assume you’ve got a loyal client. Complacency is the enemy of loyalty. A client’s trust and loyalty can be swept away if a salesperson gets cocky or lets performance slip, even on just one interaction.

Remember, you don’t need to provide good customer service to all your customers…just the ones you want to keep!