Depending on your business and industry, customer retention and business development programs may appear to have relatively different impacts to your bottom line when compared against each other. Based on our years of experience and some basic facts, we believe the best strategy is to strike a balance between your customer retention and business development efforts to maximize your results.
When engaging in business development efforts, most companies use the hunter/gatherer approach to uncover new potential customers, convert them to a sale, and then work to acquire more. They use metrics like market share, and customer turnover to rationalize their investment in business development: either you’re growing or you’re shrinking. Make no mistake, to remain viable, every business must have a business development effort. As marketers and communicators, we rely on this need to help clients reach out to target audiences to help them sell something. Without this need, there is no need for us.
However, many businesses underestimate how customer retention – after they’ve converted a prospect to a customer – can be a more efficient and profitable way to growing revenue vs. business development alone. Unfortunately, most businesses view their customer retention efforts as a necessary service expense to stay connected with customers and express thanks for their business. But, if businesses put a little more common sense effort into their customer retention program, they would shift their view of the effort as an expense into viewing it as an investment with measurable returns. Consider this
- It costs five times as must to acquire a new customer than it does to keep those you already have
- Organizations that reduce customer defections by 5% can boost profits from 25-85%
- Existing customers are 50% more likely to try new products and spend 31% more compared to new customers
- The probability of selling to an existing customer is 60-70% – the probability of selling to a new customer is 5-20%
- Customers tell 15 people about a positive experience and 24 people about a bad experience
It’s been found that customer retention has more impact on profits than market share, economies of scale or other variables considered to provide a competitive advantage. And, many of the marketing and communications you’re already doing can be applied to or modified to support your customer retention efforts.
Where should you start? Begin with your existing customers. Do you have a buyer persona – demographics, income, industry, job responsibilities, likes, dislikes, and other pertinent details – to target them more accurately? Do you know how they became aware of your business and what motivates them to buy? Do you really understand what problem you’re solving for them?
Make sure you address their pain points throughout your campaigns so they know you understand them. Also, strive to reduce friction for them when dealing with you. Is it easy to buy from you? Is it easy for them to have a complaint resolved? Do you offer a strong warranty or guarantee that demonstrates you stand behind the efficacy of your product or service? Can they trust you?
Does your website user experience support their needs? What are they trying to accomplish when they visit? If you place too many obstacles in the way – self-serving or otherwise – you may turn a satisfied customer into a frustrated ex-customer. Also, do you have live chat so that customers can get answers in real time? A J.D. Power survey revealed that customers overwhelmingly prefer live chat vs. email or social media communication.
Consider providing your customers with valuable information content they can use that relates to or goes beyond the things they buy from you – establishing you as a credible source of information. This helps sets a favorable environment for consideration when you target them for new or different product or service offerings that you know they can use.
Speaking of information, do you have videos – product, explainer, demos, how-to or testimonials – that support your best sellers? One case study cites that product videos can increase the likelihood of a purchase by 144%.
Ask for customer feedback. It makes them feel good because you value their feedback and you gain insight into how they think and feel about you. It can be as simple as concluding a phone conversation or an email by asking how they feel you’re doing in meeting their needs or asking how you could do better.
Train your staff – anyone who interfaces with your customers – with the most important aspects of your customer retention program. Do they understand how to suggest an upsell without being awkward or pushy? Do they truly understand what problem your company is solving for the customer? Are they trained to ensure a positive customer experience?
Striking a balance between your customer retention and business development efforts can help your company survive challenging economic conditions and thrive and grow even more in robust environments with a greater degree of efficiency and return on investment.