How Happy Are Your Current Customers?
68% of customers leave because they perceive what you are offering isn’t beneficial to them or someone else is offering an alternative solution with benefits that resonates with how they want to do business. It may even be more expensive, but because they believe that the benefits offered are greater, they are okay with spending a little more.
I think it’s safe to assume that we all agree that customer retention is vital to any organization. But let’s dig a little deeper into the “why” it’s so important.
If you consider for a moment a slight reduction (5%) in the customer defection rate has a disproportionately positive effect on profitability. It’s proven that companies with high retention also grow faster. However, customers can only be retained if they are loyal and motivated to resist competition. When your customers are merely satisfied with the service they receive they may still “walk”. Your customer retention management relies on the combination of the following:
- High satisfaction with product performance and customer service.
- High intention to continue to do business with you.
- High willingness to recommend you to others.
Let’s review an example that Bain & Company uses to illustrate the importance of customer retention. Company A has 1,000 customers and retains 90% of them year over year. Company B also has 1,000 customers but retains only 80%. Both companies are adding new customers at a rate of 20% annually. Company A will experience a net 10% growth rate while Company B is not growing their customer base at all. If you look at it over several years, the retention growth rate continually compounds year over year. At the end of 9 years, Company A has actually doubled the number of customers while company B only has 700 customers out of the 1,000 starting point.
As you can see, keeping existing customers happy means they become returning customers which are critical to your business revenue growth. It’s been proven that returning customers are also known to spend more than first-time customers because they have already established that you’re someone they want to do business with and feel that the investment (great or small) is worth it.
If you think about your favorite place to shop and why it’s your favorite (meaning you are a returning customer) it really helps drive home this point on a personal level.
Here’re a few things that you can do to help keep your customers happy and loyal.
- Say Thank You – It’s an obvious one and one we often times forget to do. Customers like to feel appreciated especially if they have spent money with you.
- Get Customer Feedback – Asking for feedback about their customer experience, current business needs or product quality shows that you’re engaged because you’re looking for ways to improve what you do and that you value their feedback.
- Consistently Communicate – Reach out to your customers on a regular basis. Whether it’s in a newsletter, email or social media it allows you to engage with your customers in a variety of ways. Customers want to hear from you about products, services, discounts, and events, so make your presence known.
- Highlight a Customer Experience – Showcasing one of your customers in an email, newsletter or social media allows your clients to see how others are benefitting from your product or services. This is a powerful way to promote new service and product offerings to your existing customers.
Finding new customers is great, but keeping existing ones happy and turning those new customers into loyal buyers of your product is even more important. Customer retention is the name of the game and the better yours is, the more profitable your business will be.
Eric Fraterman with Customer Focus Consulting. “Improving Customer Retention Is Vital to Profitability and Growth.” http://www.customerfocusconsult.com/customer-retention.htm