Customer Retention Matters. Why? because it's cheap, it means that you can increase profit without increasing prices, or finding new customers.
Independent research has established two clear facts:
1. On average, businesses will lose between 30% to 50% of their customers every 5 years. The bad news is that this figure increases during a recession.
2. If you can hold on to an extra 5% of your customers you could double your profits!
The relationship between costs and winning new business is well known. Adopting a strategy of listening to your existing or recent customers and finding out what is important for them could be the most financially rewarding exercise you conduct this year.
Get Personal: 6 Steps to Customer Retention
Don't just assume the reason a customer stops buying from you is price. There are normally many more reasons as to why this is happening; customer needs are not being met, poor service or communication, targeted by a competitor, new product/service requirements etc.
Here we have put together 6 steps to help you improve customer retention.
Step 1: Make it Measurable
You will need to be able to answer the question “How successful was our retention strategy” So, measure your existing retention rate, and then set a new retention goal. You will need to set out a clear strategy, i.e. is your focus simply on retaining your existing customers or on expanding the depth and breath of products and services that customers purchase.
Step 2: Focus your Effort
It goes without saying that all customers should be treated with care. However the 80/20 rule applies here more than ever.. 20% of your customers account for 80% of your sales. You should target that 20% for special treatment. Step 3: Identify what your customers need
You have to ask your customers what they really want and where the performance gaps exist. What do your customers value most? Prices? Convenience? Speed? Customised services? More Personal Contact? Unless you know, the services you provide may not be what they really want. Asking customers these questions shows that you care about them and their business. This dialogue in itself can strengthen customer relationships and improve loyalty. Step 4: Develop Programmes to Improve Performance
Like all successful change, an effective improvement programme must be driven from the top down. This is also the hardest part of customer retention, and in our experience where the process often breaks down. In order to be successful, companies must follow through with changes based on what they have learned about their customers. New processes must be put in place, but as mentioned in our newsletter, the ultimate payback of sustainable growth and profitability should make it worthwhile. Step 5: Improve your Stickiness
A part of doing business today is that customer’s chop and change providers much more regularly than even 5 years ago. The internet has made sourcing alternatives much easier for your customers. To counteract this you should make it hard for your customers to leave. There are many ways of achieving this stickiness – mainly centred on making your product or service more integral to your customers day to day lives or business. The two key issues are:
• Customise what you do. Offer your customer more than competitors, something that offers real value, something they would find hard to live without. This goes back to knowing what your most important customers really want and then tailoring your service or product to meet this.
• Reduce the pain: If you can make the life of your customers easier they will stick with you. Whether this is saving time, saving money, or offering customisations..everyone is looking for an easier life. Step 6: Measure & Iterate
Once you’ve started don’t stop! You should continue to measure customer retention progress based on your set goals. In our experience companies may put a customer retention or mystery shopping programme in place and leave it there, tick the box and move on. But if your customers are going to remain loyal, you need to communicate with them on a regular basis. Monitor changes in your customer’s requirements or buying behaviour so that you can reflect this in your business, build loyalty and beat the competition.
Why Customer Satisfaction is so Important
It’s easy for a sole trader to have their finger on the pulse of customer satisfaction, with feedback given personally. In larger businesses, unless management have direct unbiased contact with their customers this valuable feedback is hard to get. This is why surveys are necessary to measure and track customer satisfaction.
Conducting a customer satisfaction survey is a great thing to do, but it is only one step to making a real lasting difference. Major long lasting improvements require change in a company and support of senior management. This involves understanding what the research is saying, implementing action plans and measuring ongoing performance.
Delivered correctly, customer satisfaction programmes result in more loyal customers, higher salesand market share, a stronger brand and happier staff. To deliver major long lasting improvement, our customer satisfaction programmes include:
• How to ask the right question to the right person
• What questions to ask….what do customers consider to be important
• How should the survey be carried out.
• How to measure satisfaction, and the importance attached to specific attributes
• Creating your Customer Satisfaction Index – when are customers genuinely satisfied/loyal?
• How to use customer satisfaction studies to best effect
• Implement an Action plan – quick fixes and longer term improvements