Customer Retention As A Business Growth Strategy
Frederick Reichheld of Bain & Company found that the cost of acquiring a new customer is 6 to 7 times more than the cost of retaining an existing customer. Yet so many companies focus the majority of their time, energy and resources on acquiring new customers at the expense of retaining the customers that they already have.
Clearly the maturity stage of your business has an impact on your strategy; if you’re a new business, your focus should be on acquiring new customers. However, if you’re a more mature business that is focusing your strategy on customer acquisition, beware. You may be creating a problem.
What is your customer philosophy?
I guess my philosophy isn’t in vogue today, but I’ve learned throughout my 30-year career that if I put my customer’s interests ahead of my own, things usually work out well for me. This isn’t to say that you won’t have customers that you need to fire or that you sometimes need to have uncomfortable conversations. However, if you get a customer in the door and shift them to your service delivery process and move on to the next new customer, you’re setting yourself up for problems down the road. You’re making them feel like they’ve been used.
Do you truly appreciate your customer’s business?
I started my current business a little over a year ago. In setting up my business, I’ve purchased more business-related products and services than I have at any other time in my life. I’m amazed at how rarely I hear someone say, “Thank you for your business.” I probably hear genuine appreciation 5-10% of the time I buy something. In today’s economic environment where business investment is at historic lows, business should be thankful for every single customer that spends their hard-earned money with them. If you’re not, shame on you. But you will pay for it.
An outstanding customer experience makes it easier to produce new business.
As we’ve written previously, referral selling is one of the two most effective revenue generation techniques because it incorporates the concept of social proof. Many sales trainers suggest having the sales person call the buyer post-sale to check up on them is the way to generate referrals. I disagree – you should have a service delivery process in place that demonstrates that everyone in your company understands your customer and what they need, appreciates their business and will go the extra mile to make sure they’re happy. You won’t have to ask delighted customers for referrals, they’ll send business your way because they know you will give them the same quality service.
Is your company narcissistic?
I recently saw an executive of a prominent company insult a customer in an online forum. To me, that is inexcusable. This executive is younger, as are most of the other executives at the company. Many young business owners and executives have yet to experience the inevitable setbacks and tragedies that we all face sooner or later. They think that their business will continue on an unceasing upward trajectory. I would suggest they consider Proverbs 16:18, “Pride goeth before destruction, a haughty spirit before a fall.” Those that lack humility when they’re up often find a lack of hands to help them up when they fall. I would predict that this company has an iceberg in front of them that they may not see yet. Can you say MySpace? Would you recommend a vendor to your friends that insults their customers? Do you think this executive appreciates his customers?
It’s far less expensive to keep an existing customer than it is to acquire a new one. If you’re losing customers and replacing them at the same rate, you’re losing money – do the math. Business spending is at historic lows and your customers have options. If you don’t do anything else as a result of reading this article, pick up the phone and call a customer and say, “I wanted to let you know how much I appreciate your business. Is there anything I can do to improve?”
Maybe I’m oversimplifying things, but I don’t think so: put your customer’s interests ahead of yours and things will work out well for you. Be genuinely appreciative of your customers, they have options. And for crying out loud, show a little humility. Nobody wants to do business with an arrogant a-hole.