Customer Retention is a Business Imperative
Do you sometimes focus so hard on getting new business that you lost sight of how crucial it is to keep existing customers coming back for more. How many of your key priorities for this quarter relate to programs to increase customer retention? Customer loyalty is one of the strongest indicators of how healthy your business is and it should be a big part of your business strategy. The percentage of customers who continually come back for more of your products or services is proof of business goals set and achieved. Customer retention is a business imperative in order for your business to maximize its profitability.
Retaining customers is vital to your business development efforts, and is far more impact to your bottom line than getting new ones. Companies with a great new business funnel don’t necessarily outperform those who keep clients long-term. I’ve seen companies that effectively use marketing materials to tout how different they are from the competition. They focus on how they add value to justify their price point and close a lot of new business. But this is not a good business strategy if your customer turnover is too high. Higher turnover will ultimately lead to higher customer acquisition costs per customer and lower yield on each customer. In other words, you lower the average life time value of a customer. It’s clear that a business strategy focused on retaining customers by delivering on promises creates consistent revenue and a healthier business model.
Too often companies assume this is the nature of their industry and accept the turnover. I worked with one such company that decided to make it a business imperative to lower customer turnover. As quickly as they brought in new clients, the old ones would jump ship. After careful review of their operations and conducting root cause analysis they found they could make major improvement in turnover. The primary cause of turnover was that they were investing in the wrong type of employees and processes in customer service, which was directly affecting satisfaction of their customers who were already was under constant siege by competitors. They made some minor tweaks in process and one personnel change to set the example, and now customer retention is way up and each account is growing steadily.
How many existing customers have you sacrificed for new ones and how much has it cost your business?
Howard Shore is a business growth expert who provides business strategy and consultation services. To learn more about how an executive coach, management consultant, leadership training, or business coach can help your team with employee engagement, please visit his website at activategroupinc.com or contact Howard Shore at (305) 722-7216 or email him.