Brief Encounter: “A minor meeting, short in duration with a person who you will probably never see again.”
Does this describe the relationship between you and your customers?
If it does, then maybe you should take a few moments to rethink your current customer retention strategies.
Knowing the Financial Value of Your Customers
Did you know that acquiring a new customer could cost five times more than satisfying and retaining current ones, yet the average company loses ten percent of its most valuable resources each year?
Are you aware that customer profitability rates tend to increase over the life of a retained relationship and a five percent reduction in the consumer loss rate can translate to a 25 to 85 percent increase in profits?
Whether you answered yes or no to these questions, do you know how to calculate the financial value of a lifetime customer?
Every business relationship is an asset and has an economic value. To determine a customer’s financial value, take your average transaction amount and multiply it by the number of transactions he or she will conduct with your company over time.
For example, if your average person purchases $250 worth of product or services every quarter for 5 years, then your average customer’s financial value is:
$250 x 4 = $1,000 x 5 = $5,000
There are many reasons customers leave: they move; they develop a friendship with another company; they try the competition; they are dissatisfied with a product or service.
But, the number one reason a company loses customers is because it has not developed an actual customer strategy. Customer delight is critical to gaining more new customers and losing fewer of the ones you already have. How do you know if your customers are satisfied?
Predicting Customer Behavior
Knowing your customers and giving them what they want are fundamental principles of customer retention. But, how do you “get to know” your customers? Tracking past and current customer behavior is the best predictor of future customer behavior. Start with identifying actual behavior.
For instance, being a frequent buyer of online products is a behavior whereas being a 25-year-old male is a demographic characteristic. Focus on behaviors and consider the following example:
Consumers who match your demographic criteria frequently visit your web site but have never purchased your service or product.
Consumers who are outside your target demographic make frequent online purchases at many different web sites.
If you sent a coupon to each of the above groups and asked them to visit your web site and make a purchase or sign up for service, the response would be higher from the second group, the buyers. However, they were actually outside your target audience. Therefore we can rely on the fact that actual behavior is better at predicting future behavior than are demographic characteristics.
Retaining customers also requires keeping in touch with them and knowing they are still active with you. If you don’t, they will slip away and eventually take their business elsewhere.
Retention can also be improved if your employees – especially those on the front line who directly interact with customers – understand how important each customer is to your business.
This all starts with training. Many training programs concentrate on technical skills and completely ignore the soft skills, which include listening to and understanding what the customer is saying.
How employees treat customers is every bit as important as their mastery of the technology required by your company. Employees should ask the appropriate questions to determine the cause of the customer’s complaint and know how to empathize with the customer in the process.
Relationship marketing is not about being best friends with your customers. It uses the event-driven tactics of customer retention marketing but treats marketing as a process over time rather than a series of single, unconnected events.
Using the relationship marketing approach, customize programs for individual groups of customers depending on what stage of the process they are in. For example, you could send a “Welcome Kit” to new customers, offering an incentive for purchasing additional services or products.
If 60 days pass and customers have not responded, you would follow up with another direct mail or e-mail offer. This approach allows you to use current customer behavior to trigger the appropriate follow-up approach.
Personal Touch Process
Small businesses have the upper hand in capturing their market share through true customer retention and positive customer experience initiatives. It’s so simple that it is often overlooked. The personal touch of a small business is obviously going to have a positive affect on customer retention.
To make sure your customers have a positive experience, follow this 7-step personal touch process:
- Offer only proven and quality products and services
- Demonstrate customer appreciation
- Provide responsive and pro-active customer service
- Give instruction on how to cooperate with your service strategies
- Share testimonials with customers and potential customers
- Educate the customer about the industry or market and about the value of the business
- Invite customer’s opinion and feedback on products and services
Finding Out What Customers Think
Cultivating the customer relationship is key to achieving your desired business results. However, a passive system that depends on your customers informing you without any solicitation on your part is not likely to provide the information necessary to improve customer retention.
Only one in 26 customers who have a complaint will call and inform the company. Occasionally, a customer will call with a compliment. But, with passive analysis, companies miss out on important feedback and often miss the occasion to discover untapped opportunities by directly contacting their customers.
Use a proactive approach to customer analysis to find our what your customers are really thinking. Companies will discover that proactive
communication with their customers enables them to collect information that was previously lost. The results of proactive communication include:
- Valuable data for effective marketing strategies
- Valuable data for new product and service implementation
- Identification of customer needs
- Customer satisfaction history
- Customer profile and contact information updated
- Collection of win-back criteria to reclaim cancelled or inactive customers
In his book, “Customer Satisfaction is Worthless, Customer Loyalty is Priceless,” Jeffrey Gitomer says that every company’s universal mission
statement should be, “Treat every customer in such a memorable way that when the transaction is complete, the customer tells someone else how great it was.”
This really boils customer satisfaction down to its most basic ingredients. Understand the need for developing customer relationships; stay in touch with your customers, find out what they are thinking and whether or not they are satisfied; know how to solve your customers’ problems and exceed their expectations; and finally, train your employees to do the same.
A “brief encounter” customer will not help grow your business in the long run. So strive to develop new customers into lifetime customers and reap the long term rewards by implementing a customer retention strategy.
About the Author
June Van Klaveren helps her customers promote and grow their businesses through exceptional marketing and customer service strategies. June can be reached at firstname.lastname@example.org.