Customer retention is ultimately driven by value. Even the best segmentation, targeting, positioning, creative messaging or promotion with flawless execution will fall flat in the absence of value. In developing a plan to maintain and upgrade a customer base it is necessary then to build on solid foundation. Then, and only then will the steps unlock the door to greater customer retention and overall organizational success.
To succeed, customer retention must be a top-down, company-wide initiative. Truly committing to customer retention is hard work, because it affects virtually every aspect of your organization. But the ultimate payback in sustainable growth and profitability makes the effort worthwhile. The path to customer retention involves six key steps.
Step 1 Ask – Ask your customers what they want, what they like and don’t like. Include customer surveys on your Web site, at point-of-sale and in package inserts. You’ll likely get “extreme” feedback from customers who either love you or hate you. Customers who are mildly satisfied are not as motivated to speak their minds. But only ask if you’re prepared to deal with the responses. Turning a deaf ear to a problem is the kiss of death. Please remember that customers expect you to take action when they complain, especially if you initiated the dialogue Use feedback from your surveys to make improvements to your product or service. Customers love it when you listen to them!
Step 2 Evaluate – Evaluate your customer data to find out who your best customers are. This may sound like a big “duh”, but the devil is in the details. There may be trends that you’ve overlooked. And keep an eye on profitability, not just transactions. In the credit card world, a deep spender who pays off his balance each month is usually not as profitable as a moderate spender who carries a balance. When you know who your best customers are, you can tailor your marketing programs to keep those customers and encourage them to spend more with you.
Step 3 Stimulate – If you have sold your customer a service and they’re not using it, get them to activate. Examples: online bill pay; long-distance service; credit and debit cards. At the start of a new relationship, there’s that warm and fuzzy feeling when a customer signs on. You got them to say “yes.” Four months later you’re wondering why your customer doesn’t love you. Is it something you did? No. It’s something you didn’t do. You sold them and moved on. You assumed that the customer would fend for himself and figure out all the great things about doing business with you. The first few days/weeks of a new business relationship are critical. Shower them your kindness. Send direct mail and e-mail reminders. Thank them for their business. Do everything you can to make the “honeymoon” phase of your relationship special. In the long run, if they’re not using your product or service, they’re likely to bail when a better deal comes along.
Step 4 Reward – Reward your customers with meaningful perks for doing business with you. It seems like everyone has a loyalty program these days. Customers are getting weary of “me too” programs that don’t offer substantial value. Instead of always giving customers what they expect, give them the unexpected. For example, a mid size accounting firm rewarded some of its best customers a box of Haigh chocolates for their continued business. It was an unexpected tasty little perk that came out of the blue. Results? These customers had above average retention rates the following year. Sometimes the little things can mean a lot.
Step 5 Aggregate – Try to get all the customer’s eggs in your basket. In other words, cross-sell other products and services. It’s much easier because you already have a relationship with these customers. Offer “one-stop shopping”, consolidated billing, free postage and other benefits for giving you more of their business. Everyone’s busy, and consumers are looking for service providers who can make their lives easier. It’s what they want, so why not give it to them?
Step 6 Take action – Having a great product and great customer service are the foundation for customer retention. And positive word of mouth is by far the best marketing tool in your arsenal. But you can’t control when that happens, so you need a marketing plan to keep the customers you want. Don’t just hope your customers love you – be proactive. Put your plan in writing and make it stick. Follow through and take action. Use direct mail, e-mail, newsletters and other marketing tools to make your best customers feel special.
Treat your best customers with respect and they’ll reward you with loyalty beyond your wildest dreams. Send them targeted messages. Give them special incentives. Keep in mind that it’s easier to cultivate your existing customer relationships than to begin new ones. Not to mention less expensive.
The role of customer retention in the overall organizational strategy is one of protecting and managing the primary source of resources. It is also one of defending and enhancing market position and of optimizing resources and opportunity.
That is why although seemingly a purely tactical approach, customer retention also belongs to the realm of strategic market planning and is a required strength inherent to any successful organization.
It costs about five times as much to acquire a new customer as it does to keep a current customer. That’s why it pays to pay attention to your best customers. In the end, they’ll buy more, stick with you longer, and tell their friends how great it is doing business with your company. Isn’t that what we all want?