Boost your
Profits through Customer Retention
How often do we hear of businesses focusing
almost entirely on new sales rather than looking after their existing
customers? Are you guilty of it in your
business? When the going gets tough do
you cut prices and spend a lot of time and effort on getting new (and less
profitable) customers?
You may have come across this oft quoted
study, attributed to, variously, The American Society for Quality, the US
Chambers of Commerce and a book called “Lessons from the Field” (Howard Feiertag and John Hogan).
This gives the following reasons for
customers leaving:
·
Death or moving away 4%
·
The influence of friends and
relatives 5%
·
Competitor marketing and
special offers 9%
·
Dissatisfaction with product or
price 14%
·
Perceived indifference of the
supplier 68%
Reflect on that – more than 2 out of every
3 lost customers do so because they believe you don’t care!
But is it as simple as that? A study by RightNow Technologies says…
·
73% of customers leave because
of poor customer service but the supplier thinks that only 21% leave because of
customer service.
·
The supplier thinks 48% leave
because of price when in fact only 25% do so.
In another study Mercer Management
Consulting found that for a selection of retail outlets, only 15% to 30% of
customers are price sensitive – that is, they might change supplier for a
better price.
So retaining customers is not (usually)
about price – it’s about letting the customer know you care.
“So if you love your customers can you
charge what you like?”
No. You have to be competitive in your
market - but superior customer care and marketing mix (USP, positioning and so
forth) means you get to keep most of your customers and still charge a premium.
Low prices won’t keep customers if they
think you are indifferent to them. Worse, using low prices attracts disloyal
customers – remember why they come to you in the first place!
The worst strategy of all is using low
prices to make up for the fact that you and your staff really don’t care…
“It’s really difficult and expensive to get
all my staff to provide great customer service”
It might seem so to start with – but the
rewards are huge…
·
According to a study by the
global business consulting firm Baines Consulting, a 5% increase in customer
retention can increase a company’s profitability by 75%.
·
Reichheld and Sasser reported
that when MBNA America reduced its 10% defection rate to 5% their profits rose
by 125%.
The other statistic that you need to
reflect on is that it costs anywhere from 3 to 20 times more to gain a new
customer than to look after your existing ones… sounds like a bit of a “no-brainer”
to me!
One way
of looking at it is that you need to do everything you can to move your good
clients and customers up the Ladder of Customer Loyalty. Imagine a ladder with different types of
customer on each. Let’s start sat the
bottom…
·
On the bottom step: Suspects - the market place – they
probably don’t even know about you… but there are a lot of them!
·
If you make contact with them
in some way through your marketing, they become Prospects… but still not customers!
·
One step further and they take
the plunge and become Testers – they
make a purchase, without any real commitment or expectation. This is your first chance to capture them for
the long term – how good will their customer service experience be?
·
If they like what you give them
they will come back – become more comfortable with buying from you – only now
can you really call them Customers!
·
If you look after them, they
will enjoy using your services or buying your product and that experience turns
them into Regulars.
·
But you can go further – a lot
further! At this stage, the customer is
still reactive – they buy from you because of the good experience that they’ve
had – great product or service, hassle free dealing and caring customer care
from you and your team – they become an Advocate
of your business. If asked, they will
sing your praises to others.
·
The final step is when your
customer is so delighted and satisfied with your service that they go around
acting as your unpaid ambassador telling people without prompting how good you
are and that they would be mad not to do business with you! These are the Promoters – they are a real asset to your business and they are
your most valuable customers.
Recognise them, nurture them – and make
absolutely sure that you understand and care for them at all times. It may sound a little soft and fluffy, but in
doing so your profits will be enhanced significantly – and there’s nothing
fluffy about that!
To
find out more about how coaching can help deliver Outstanding Customer Service
in your business give us a call. +27 74 127 6439 or email nevillesol@icloud.com
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