There are few things more critical to a firm’s long-term success than its ability to maintain a stable and growing customer base. While many companies focus on finding new customers, it is a futile exercise if you do not retain the customers you won.
The impact of customer retention is felt in three ways:
1. Profitability. We have all heard that it is more expensive to find a new customer than to keep an existing customer. How much more expensive depends on your industry, but estimates range from 5 – 20 times more expense is incurred finding and landing a new account than to maintain an existing relationship.
2. Revenue. As a matter of simple math – if you increase client retention 5 per cent, from 85% to 90%, this factor alone, over a ten-year period, will increase revenues by 77%.
3. New Business Development. Reputation is central to your new business development campaigns. It’s hard enough to open new doors without the stigma of a poor or non-existent reputation. A solid reputation and enthusiastic referrals are the tickets to fast track growth.
Here is a suggested process, with the major steps to review and improve your customer retention:
Get started, do something, make something happen, be proactive. Work on the business instead of in the business. Make some small changes, which can get the ball rolling for bigger changes. Take a piece of your marketing budget and dedicate it to customer retention.
Begin with an assessment – either an assessment you conduct informally, from the inside, or bring in a consultant to give you an independent assessment. If you go the internal route, your biggest challenge will be to be objective and impartial. If you select an outside resource, your biggest challenge will be to find a good consultant. We’ve found that the biggest obstacle to improvement is inability to see a problem. Once you see it, it’s typically easy to fix.
Don’t try to fix everything at once; start with the most obvious and most critical.
Get others in your firm involved – don’t go it alone. Your people know most of the problems and how to fix them. They will also support that which they help build.
Allocate the necessary resources and provide the support to bring about change. Overkill isn’t desirable, but it’s a lot better than a weak effort that fails.
Commit yourself and your organization to continuous evaluation and improvement. Measure results and keep experimenting.
Here are some of the best practices of firms that excel in client retention:
Measure your current status. A device I discovered a couple years ago is the ‘third party interview.’ Try as you might, people will often not tell you directly the things you most need to hear. They are more likely to tell a third party, especially the things that are least complimentary. I recently hired a firm that specializes in live, third party telephone interviews and the results were outstanding. We found things we needed to fix, and once we knew we needed to fix them they were easy to fix.
Provide superior service. This may include refocusing part of your marketing budget to customer service, dedicating people and resources to customer service, hiring top quality people for these positions, providing training for these people, empowering the people to the greatest extent possible, and getting personally involved yourself at the appropriate level in your customer’s organization.
Get sales involved. Ask your sales people to create written account plans for each account in your top 30 per cent. Include a review of the client’s industry, business projections, your position, threats to your position, a plan to expand within the account, most recent customer satisfaction results, a plan for building and maintaining executive relationships, etc. Ask them to review the plan with senior management and peers to get additional insight to maximize the opportunities presented.
Show appreciation. Recognize your top customers – the sky is the limit as to how you do this. Client appreciation events, parties, gifts, etc. Don’t treat all customers equally – follow the 80/20 rule.
Find out what your competition does, and out-service them. This may include a 24 hour help line, an 800 number, a value-added website, a newsletter, educational seminars, etc.
Know your customer’s goals, and make them your goals. An example is an apparel manufacturer whose top goal is the profitability of the retailers through which it sells its goods. If you have channel partners — help them sell more. Your Success is their success. There are a couple of “Ideas You Can Use” regarding channels programs on our web page.
Have an escalation procedure. Let your organization know how to get access to higher levels of management to work customer issues. Having a senior officer on “duty” and making that person’s number available to everyone, for example.