It’s long been accepted by most businesses that retaining current customers is more cost-effective than seeking new ones. Of course, increasing the current customer base will always be a key activity, but many companies do seem to place this ahead of the needs of satisfying, retaining, and growing business from their current customers.
There are two sources that tell you how important this latter task can be. Firstly, the White House Office of Consumer Affairs has said that it is between six and seven times more costly to attract new, rather than retain existing, customers. Secondly, management consulting firm Bain & Co have found that a 10% increase in retention can result in a 30% increase in a company’s value.
How best to retain your customers?
Assuming these figures are reasonably close to what you would find, it makes it clear that customer retention should be a major strategy for any business. So, how best to achieve it?
Let’s start with customer service. It has been suggested that it can take up to a dozen positive customer experiences to outweigh a single negative event. Obviously, this would depend on the level of problem, but even if the figure is often much lower, this still suggests that making sure customers have a positive experience – even if they need to query or complain – is vital to retention. Bain also suggests that a customer is four times more likely to buy from a competitor if a problem they’ve experienced has been service (rather than price or product) related.
The second key to retention is through the provision of customer loyalty programmes, or special ‘regular customer’ promotions. Often, people believe loyalty is simply taken for granted, especially when they can see that new customers are given a better deal to sign up. Therefore it’s also vital that what is offered is seen as having genuine value, or exclusivity, for those who stick with a company.
Flounces off in a huff!
Finally, consider this. In past times, losing a customer, however annoying, would likely see them moan to a few friends – and that could be damaging. Now, thanks to social media, you can multiply this by a factor of several (or many)! It’s also fair to say that retaining a customer can lead to positive experiences in places like Twitter or Facebook – another sign of their value.
There’s a saying that ‘It’s easier to sell up, or sell on, than sell new’. Retaining customers helps achieve the first two parts of this, while you will also be actively seeking the third. This suggests a more rounded and effective business strategy