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Following on from last
week's article about customer service, this week we get down to the
nitty gritty.
Some facts:
-
Once acquired, a customer
is your business's most valuable asset - an endless stream of
dollars and dividends.
-
The bottom line on
increased customer retention is increased profits.
-
Retention strategies are
far less costly than conventional marketing, advertising, and direct
field selling costs... and they produce a proportionately-higher
return on investment.
-
Improvements in customer
retention rates mean substantial improvements in profitability each
and every year.
Let's look at some
interesting comparisons:
Let's hypothetically examine two companies that both sell goods that
cost $1,000 each.
Company A has a 60% retention rate and Company B has a 70% retention
rate. (That is, each year 40% or 30% of the customers drop off).
Let's also presume that both companies acquired 100 new customers this
year.
Now, let's see what happens to those 100 customers over a five-year
period:
|
Year |
Company A |
Company B |
|
Customers |
Revenue |
Customers |
Revenue |
|
First Year |
100 |
$100,000 |
100 |
$100,000 |
|
Second Year |
60 |
$60,000 |
70 |
$70,000 |
|
Third Year |
36 |
$36,000 |
49 |
$49,000 |
|
Fourth Year |
22 |
$22,000 |
34 |
$34,000 |
|
Fifth Year |
13 |
$13,000 |
24 |
$24,000 |
|
Total |
|
$231,000 |
|
$277,000 |
|
Avg $ revenue derived by the
original 100 customers over a 5-year period |
|
$2,310 |
|
$2,770 |
Yes, customer retention pays ... big time.
Strategy 1: Customer
Research
Naturally, customer service
is central to a great customer retention program, so let's immediately
dispel a basic mistake that just about every business makes...
Customer service isn't about delivering what we think they (the
customers) want.
Customer service starts with finding out what customers really need and
want, as distinguished from what we think they need and want. See
the difference? And, customer research is where it all begins. But, be
warned. To be successful, customer research must be objective, unbiased,
and generally representative of your entire customer base.
Research will allow you to find out what customers want and need from
you - and are getting or not getting, as the case may be. It should
also find out how well your competitors are doing in this respect.
Key point: Train staff to ask questions, and never miss an
opportunity to ask that most basic of questions:
"How are we doing?"
Strategy 2: Measuring
Performance
Having researched customer
needs and wants, and having designed a system to meet those needs and
wants, it is essential that you constantly monitor your system for two
reasons:
1. To insure that customers are getting the levels and quality of
service they were promised.
2. To insure that everybody in your organisation is kept informed of the
degree to which those goals are, or are not, being met.
You see, customer retention is a company-wide undertaking, not just the
responsibility of those directly involved.
Strategy 3: Aligning Perceptions With Reality
There are two very important "perceptions" to cover here - the
customers' and those of the business itself.
Sadly, customers are not always aware of the quality of service they are
getting, and it's your job as manager, to make sure they are. As a
matter of fact, this is a job for all staff!
You see, the market itself tends to cloud the issue. Just what is
service? What does the customer expect? What level of service does the
competition publicly state that they deliver? What level of service do
they actually deliver?
The second "perception" which needs to be closely examined to ensure
that it accords with reality is the perception which the business has
about delivering quality service. From experience, the great majority of
businesses seriously over estimate their ability in this regard.
Performance which they rate as "good" or "excellent" may be perceived by
customers as only "average".
You see, when it comes to customer service, "perception is reality". Any
mis-perceptions on the customer's part, whether self-generated or
induced by the competition, should be quickly corrected by clearly
stating and then demonstrating your actual performance.
Key point: Finding out what your customers think about your service, and
then taking the appropriate steps to deliver on those expectations is
essential if you want to retain your customer base.
More strategies to follow in next week's newsletter....or if you really
can't wait that long click
here!
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