Sales Tip: Retain your Customers to Grow your Business

Newsletter  Feb. 2010 by John Boyens Part 1 of 2

The goal of any business is to create loyal customers who want to buy their products or use their services on a consistent basis.  In other words “get them” and “keep them!”  Retaining customers requires that the customer is satisfied with the level of service provided, the quality of the product and the service experience in general. The purpose of this article is to share with you some “best practices” from other successful Franchise Systems to help you improve your customer satisfaction which leads to increased customer retention and ultimately improved profitability and cash flow!

Our research shows that even small improvements in customer retention can produce sizable benefits…which is why the most effective Franchise Owners always focus on retaining the customers they have. It’s been estimated that a mere 5% increase in customer retention can have a 20 to 80% lift in profitability!

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

• It costs a lot less to keep an existing customer than it costs to acquire a new customer.
• According to the Harvard Business Review the cost to replace lost customers can be six to seven times more expensive than winning their business in the first place
• It can take 18 to 24 months before a customer becomes profitable.
• Given marketing costs, sales costs, training costs and ramp up time most Franchise Owners need a minimum of 18 months of purchases and/or revenue to “break even.”
• Customer retention is very different than renewal dollars.  Renewal dollars focuses only same store sales while customer retention focuses on the number of retained/repeat customers.   One big mistake Franchise Owners make is that they only track (and in most cases compensate their salespeople on) customer renewal rates versus including customer retention rates into the formula.  When your 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.

As we all know customer service is a huge driver in customer satisfaction and customer retention.  So, with apologies to David Letterman please 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

After reviewing this list I encourage to ask yourself how many of these customer service mistakes have your employees 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 customers: What makes them unique? What products/services do they buy?  How often do they buy?   Who else do they buy from?
2. Deliver flawless results: To establish long-term customer 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 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, social networking, etc.) to proactively manage your customer contacts.
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.

If Franchise Owners can get their employees focused on delivering customer service excellence their customer satisfaction and customer retention numbers will go through the roof!  In addition satisfied customers buy more, buy more often and tell others which means a significant increase in referral business.