Stop the Churn - Effective Customer Retention Strategies
As a business owner, I’m sure you know the importance of retaining customers. A high churn rate (i.e. low customer retention) is costlier than you might imagine. Aside from the additional pressure this puts on your business to continually generate new sales just to remain revenue neutral, there is a serious opportunity cost to losing customers. That’s because it’s actually cheaper for you to keep clients than it is to acquire new clients. According to a Bain & Company study, the cost is seven times more to acquire a new client than it is to retain them. Some studies suggest that the cost is upward of twenty times more! Yes, an existing client is more profitable than a new client! And if you have a high churn rate your business is losing a lot of money. Research also suggests that if you improve your customer retention rates by 5 percent your profits will increase by at least 25% [1]. Is it any wonder why it just makes good business sense to care for your existing clients and keep their business?
If you are struggling with a low customer retention rate, here are some steps you can take to stop the churn.
Place a Priority Focus on Customer Experience
Pay particular attention to the entire end-to-end customer experience. Use customer surveys, focus groups and call monitoring where practical to gauge how satisfied your customers are with your performance. Make sure you measure the customer’s experience from the first “touch point” through the entire fulfillment process. If needed, provide an incentive for customers to participate – for example a discount on their next purchase to encourage participation. My guess is however, that your customers will appreciate the opportunity to tell you how great (or poor) your service is. And always remember, good or bad, customer feedback is always a gift that will help you keep (or get) your business on track.
Once you have gained insights into your performance, you must act on it quickly. Make sure you resolve issues to your customer’s satisfaction. You will need a follow up discussion with your customers to gauge the impacts of the improvements.
Stay in Tune with Your Customers' Needs
Customers' needs change and your products and services must change with them or else your customers will buy elsewhere. It’s a good idea to stay in tune with your market by reading industry newsletter and magazines, connecting with relevant organizations online and through social media. However, the best way to stay on top of this is to continually request your customer’s feedback. This is especially true for local businesses. This can be done through customer surveys, online feedback tools, or direct conversations. You may find for example that buying habits are changing or that a new customer segment is emerging requiring an adjustment to your product or service line (offering organic or “green” options to your product line is a good example of this). Regardless of how you stay in touch, understand that the market is always changing and your business must evolve as the market evolves or it will become extinct.
Stay in Touch with Your Customers
Staying in touch with your customers is a good way to keep your brand visible and to build trust. Educate your customers on your products and services; tell them about events and other newsworthy happenings; give them useful tips. Make them feel they are a priority and the first to know about sales, giveaways or promotions.
A great way to connect is through Twitter or Facebook. This makes it easy for your customers to “like” or “retweet” your communications for even more exposure. Email is also a low-to-no cost option. And make sure you personalize your communications as much as possible. The more personal the better it is for creating a bond with your customers.
And remember, consistency is king. Get into the habit of emailing, tweeting or posting a newsletter, coupon or sales flyer to your customers on a regular basis. It will pay dividends.
Create a Loyalty Program
Loyalty programs are a fantastic way to stop the churn. Reward your customers who buy frequently or who opt in to a premium program with free merchandise or discounts. Use the methods that make sense for your business. For example, a point or a discount system is great if your strategy is to drive more purchasing volume. A premium service membership is a great way to create “stickiness” with your customers. Develop a set of benefits that customers must opt-in and pay a fee in order to receive. Even if you break even at a program level, you will reap the benefits of additional sales these programs tend to generate.
Build and Cultivate Direct Relationships with Your Customers
Relationships build trust. Trust in a business setting generates sales. A survey conducted by Concerto Marketing Group in 2009 states that 83% of customers will recommend your products and services to others if they trust your brand. Did you get that? 83% will recommend your products and services to others! The study goes on to say that 82% of customers will stay loyal to your brand if they trust it. So while customers with which you have developed trust continue to purchase from you, they are also telling others to purchase from you too! Need any more reason to make this a priority for your business? Now I know cultivating direct relationships with your customers may not be practical or even possible depending on your type of business. If so, double up on our efforts to stay in touch and develop trust through other channels as described above.
References:
[1] Reichheld, F. Prescription for Cutting Costs. Harvard Business Publishing. Retrieved from http://www.bain.com/Images/BB_Prescription_cutting_costs.pdf
