Competition is tougher than ever before and many companies are out prospecting like mad for new customers.  However, most don’t realise that the fastest, cheapest and lowest risk way of protecting their business is not finding new customers but nurturing existing customers.  I know you’ve heard the old adage that it’s easier to sell to an existing customer than a new one; well it’s true and now is the time to take it to heart.

Right up front though there is one founding approach to customer retention management that will dramatically increase your effectiveness: have a bias towards action.

Planning is always important but it is better to start with an initiative that is 80% right and improve it over time than wait until it’s 100% right.  While you plan, your competitor is making inroads into your customer base.

But remember that because not everything is perfect when you start and you need to fine tune as you go. Test different approaches, try different ideas, keep the ones that work and discard the others. This also helps you to adapt to the changing market and business requirements.

Which are your valuable customers?

Before you start on any customer retention initiatives you first need to determine which customers are more valuable and which are less valuable.  This is important to ensure that you really look after the most valuable customers.

This can be as easy as ranking your customers by annual revenue, gross margin or profit.  Then you can split them into three equally sized groups: A, B and C.  “A”: customers are the most valuable.

Measure your customer retention

As the old saying goes “What gets measured gets done”.  Make sure that you measure your current customer retention in a meaningful way so that you know when you are having a positive impact.

Often, effective customer retention strategies are stopped because no-one thought to measure the baseline and success rate.  Without measures to demonstrate success, management and staff lose interest and the initiatives are often discontinued or fall by the wayside.

Retention Strategy 1: Onboarding

You can set yourself up for good customer retention at the very start of the customer relationship though effective customer on-boarding.  This is the process of introducing new customers to your company in an organised and effective manner. It generally commences at the time of order placement and may continue for up to three months, depending on the complexity of the product or service.

Done properly, customers that are on-boarded have a substantially higher retention rate, lower cost to serve and higher cross sell rate than customers that are not.

To apply on-boarding to your company think about the very start of the relationship when customers are not familiar dealing with you.  How could you make the experience easier?

For example you could have a staff member call each new customer, outlining the order and delivery process, contact names and details, etc, with a follow-up email that includes a reinforcement of the benefits of your product or services.  Not only will it make the customer feel more comfortable with your organisation but they will also probably buy more long term.  Also, you may find you have fewer order entry problems and delays which means fewer opportunities for customer dissatisfaction.

Retention Strategy 2: Pro-active complaint management

Organisations often give little thought to their complaint management process; it’s just another cost of running the business.  However, managed properly this process can be an excellent way to build strong customer relationships; it’s a little known fact that if you help a dissatisfied customer and resolve their issue they are often more loyal than customers who were never dissatisfied in the first place. Strange but true.

So you must get your complaint management process right and it’s not that hard.  There are just a few key elements:

• Make sure that you actively seek, manage and resolve complaints don’t hide them. Let staff know that you want to hear about complaints.  If have to, change the organisation’s culture.
• Remember that just recording a complaint is not enough: you actually have to do something about it.  Give staff the accountability and responsibility to act on complaints immediately.  This sounds risky but in practice the vast majority of employees want to do the right thing by the company and the customer.  So long as you have a few sensible controls in place, the risks are quite low.
• Make it easy to complain by using a range of processes and tools: web forms, paper forms, etc.
• Train staff in how to respond to complaints.  Receiving and managing a customer complaint is a skill just like any other and you need to provide staff with those skills.

There are training courses available but in summary when managing a complaint staff need to; listen carefully, agree that the issue exists (denial is never a useful option in this case) and then ask the customer what they want done to resolve the issue.  Then they need to fix the issue, thank the customer for their feedback and follow up a few days later to ensure that everything was resolved to their satisfaction.  This sounds simple but poorly managed  complaints can escalate customer dissatisfaction to anger and a customer to ex-customer status.

Retention Strategy 3: Understand what customers want and give it to them

This sounds like the easiest thing in the world and most organisations think that they are doing exactly that but often they don’t really know what customers care about.

For instance one IT company Genroe helped had a great technical support desk.  When a customer had an issue they jumped on it and solved it quick smart.  They weren’t however, as consistent with calling or emailing customers to close the loop when the problem was solved.  After some customer interviews, surveys and data analysis it turned out that having the support person close the loop with the customer was a bigger driver of customer loyalty that getting the problem solved in the first place.  It then took some explanation and training of the technical support staff so that they understood what customers really wanted and how to deliver it consistently.

Another client was about to embark on a major technical training program for their on-site staff believing that customers wanted more highly trained on-site support personnel.  Again, some research and analysis demonstrated that customers valued support staff that were responsive and “did what they said they would” more than pure technical training.  So the training was changed to target interpersonal skills and customer satisfaction improved.

So if you aren’t sure what your customers care about, and even if you think you do, take the time to do some good customer research and then act on it.  Knowing what your customers really want pays excellent retention dividends.

Building a great customer feedback process is not too difficult and you’ll find that it pays dividends over and over again.

Remember that improving customer retention will add substantially to your business bottom line, even if it is just in having to spend less to acquire new customers.  Implementing a few customer retention strategies like these is not difficult and will help you to keep your customers coming back year after year.

By Adam Ramshaw

The best customer retention initiative to implement for a specific customer often depends on their position in the customer life cycle.  What’s more, often the earlier in the customer life cycle that you execute a customer retention initiative the more effective and higher the overall ROI of the initiative.  So what should you do and when?

When considering the customer life cycle, we split it up into four distinct sections.  These sections are shown below along with the value, i.e. profit or gross margin, that different types of customers contribute to the business at different parts of the cycle.

New

This is the time when a customer is just starting their relationship with your company.  The length of time a customer spends in this stage depends on your business but it is normally anywhere from a few days to a couple of months.

The largest group of customer retention strategies that can be implemented in the New stage of the customer lifecycle is Onboarding.  Onboarding is the process of bedding a customer into your organisation and includes ensuring that their personal data is correct, that they understand the products/serivce they have purchased and how to contact the organisation.  We have proved time and again that customers that are properly onboarded will stay with the company longer and spend more money than other customers.

Onboarding initiatives can be as simple as calling all customers in their first 30 days to confirm contact details and resolving any teething problems that they might be having.

Existing

These are your company’s current customers and fall into several groups.  The first is the Ideal customer; they continue to use and grow their use of your products.  The second are the Unhappy customers, who although they still use your products, are discontented.  Lastly, you have customers in Silent Attrition.  These customers still have your products but no longer use them actively, for example, credit card accounts with little or no spending.  They are generally a drag on company value because you still have to service them but they add no profit to the business.

Customer retention strategies for existing customers start with classifying each type of customer (Silent Attrition, Ideal and Unhappy) and then creating appropriate initiatives to change their behaviour.

For instance, for customers in Silent Attrition you must determine why they are no longer using your product (are you their “back of wallet” credit card for instance) and then determine how to have them start to use your product again.

One example initiative for the “back of the wallet” issue is to target customers with a campaign to increase their use of direct debit orders.  Once they have started using the card for regular purchases they are more likely to use it in day to day shopping.

Exiting

These customers are on the way out.  They may still use your product but they are looking for the exit and actively seeking alternatives.  Given time, they will leave.

Your initial challenge in creating retention strategies for Exiting customers is to identify them.  One way is to uncover the tell tail signs that customers considering a move provide to your organisation.  For instance, if you are a bank, they may make a request for the loan pay-out details.  As you uncover these indicators, you should create initiatives to target those customers with a proactive contact.

Where customers purchase multiple products from you, you should also try to understand the order in which customers drop their product relationships when they are exiting because this can give you another good early warning.

Once you can spot existing customer you can create effective customer retention strategies to target those customers.

For instance if a request for loan pay-out details is an indictor of imminent exit for your customers you might send all customers requesting such information a special discount offer on new loans.  This means you have your best foot forward as they investigate their options.

Exited

Putting it simply, these are no longer customers.  They have left.

Strategies that are aimed at recapturing customers that have left the organisation are generically called Winback strategies.  This is the most expensive and lowest ROI place to try to implement your customer retention strategies.  Mentally customers have already moved to another organisation and it takes a large inducement to bring them back.

If you choose to execute Winback strategies then you will need to carefully manage the level of incentive that your staff can offer to customers.  For instance, you will need rules to tailor the incentive level to each specific customer in order to ensure that the level of inducement is not larger than the future business generated by that customer.

When executing Winback initiative a good approach can be to send all customers asking to close an account to a specialist team who have the training and access to special offers to try a last ditch effort to retain the customer.

When you create customer retention initiatives you will need to justify them based on the return on investment they will generate and this can be easier or harder depending on the position in the customer life cycle.  Generally, the later in the life cycle, the easier it is to attribute results to your customer retention initiatives and therefore prove a suitable return on investment.  However, intervening earlier is less expensive and more effective, but harder to prove.  Don’t let the difficulty of proving the ROI for early intervention deter you because it can pay very good returns.

For more information on how to implement effective customer retention strategies and customer management approaches give us a call.

By Adam Ramshaw