Retaining existing customers is often overlooked in the growth strategy of many companies. Yet studies have shown that it’s far more efficient and profitable to improve the retention of existing customers than it is to attract new customers to fill the hole by those who no longer buy from you (although why you need a study to prove this kind of common sense point, I’m not sure).
Which of these three approaches could help your business improve customer retention?
- Monitoring customer satisfaction and retention. Do you know your customers’ level of satisfaction, areas of dissatisfaction, the number customers who have not bought from you in the last 6 or 12 months, or where those ‘lost’ customers are now buying these goods and services? Without this kind of information you are unlikely to be able to manage retention effectively. Managing satisfaction and retention is just as critical as managing costs. Most organisations have cost accountants by the dozen, but I’ve yet to meet a satisfaction and retention accountant!
- Enhancing the customer experience. Using the data you collect on satisfaction, loyalty and retention, your next task is to identify where you can improve the quality of service. Following a downturn in performance, the founder of Starbucks, Howard Schultz, returned to the business in 2008. Since then the fortunes of the company have improved and a key element of that improvement has been a focus on enhancing the customer experience. Improvements in service quality and speed, store presentation, coffee quality and the offering of new, healthier options have all responded to customers’ concerns and helped drive recent growth in sales and profits.
- Developing customer relationships and communities. Many retailers now use loyalty programs to create a closer relationship with their customers. These approaches work in business-to-business sectors also. One of my clients, a manufacturer of products to the plumbing trade, has successfully launched an “installers’ club” where it offers qualified installers of its products higher levels of training, special offers and involvement in its new product development activity. Other less formal relationships and communities can also be effective. Customer product ratings by on Amazon’s site have helped create a relationship between the company and its customers above and beyond previous transactional websites.
© Stuart Cross 2010. All rights reserved.