By Sarah Pierce, Sr. Vice President
Customers decide to take their business elsewhere for a variety of reasons: Whether it’s a negative experience, below-average product or service, or a general feeling of being treated as just a number, people are quick to make changes. What’s more, losing a customer has a significant financial impact on businesses; the cost of acquiring a new customer is 500% higher than retaining an existing one (Alan E. Webber, “B2B Customer Experience Priorities In An Economic Downturn: Key Customer Usability Initiatives In A Soft Economy,” Forrester Research, February 19, 2008).
From a strictly financial point of view, it’s clear that existing customers are more valuable than new ones. But aside from the monetary benefits, retaining customers increases the chances they will recommend your business to friends and family. People want to feel appreciated if they are doing business with you, and they are bound to spread that appreciation if they feel that they are important to you.
With these benefits in mind, let’s take a look at some of the top customer retention tips for business owners.
1. Resolve your customer’s problems
This sounds like a no-brainer, but you’d be surprised at how often customers contact businesses with a problem that never gets resolved. According to The Verde Customer Pulse Database, only four in ten (39%) respondents were completely satisfied with how their problem was handled and six in ten (61%) were unhappy to some degree.
From the point of view of the unhappy group, the company now has two negative repercussions: the problem itself, and then failing to handle it properly after a complaint. This has a huge impact on customer loyalty. Any result which is not complete satisfaction when it comes to complaint handling causes loyalty to drop by at least 40%.
A business owner can act on this issue almost immediately with little to no additional investment. The first step is to identify who the customers are that have contacted your organization. This may require a post-contact survey follow-up, but not immediately after the contact. After a couple of weeks have passed, you should reach out to the customer to inquire if your business was able to fully address the issue. Monitor the survey results and take action with proactive outreach to the customers that indicated less than complete satisfaction. In addition to improving loyalty, this will have a positive impact on reducing negative word of mouth.
2. Forget surprise and delight – solve the pain points
Another one of our customer retention tips is to solve their pain points. For years, the commonly held belief was that we should exceed our customers’ expectations by “surprising and delighting” them, thus creating loyalty to our brand, product, and service. This is correct, but only after you have addressed the most damaging pain points in your customer experience. The occurrence of a problem can cause a 24% – 41% drop in high-satisfaction responses and in loyalty indicators such as the intention to repurchase and to recommend the business (Verde Group Customer Pulse database).
This tells us that while focusing on loyalty drivers is important, double the impact is made by eliminating or reducing specific pain points in the customer experience. There are many ways to uncover the pain points in your customer journey, but the most simple is to start is by listening to the customers that take the time to contact you with their concerns, and acting on those concerns.
3. Reward loyalty
The final point on our list of customer retention tips is to reward loyalty. There are many ways to recognize your loyal customers, and more so, let them know that you notice their loyalty. In fact, this is where it starts. Oftentimes customers have to express their loyalty to businesses in order to get discounts or special plans. In reality, the business should be keeping a record of their most valuable clients, and be proactive about offering deals to people who have been with them for extended periods of time. Let them know that you know that they have been loyal – you see them and value their business.
More so, the main lesson here is that customers want to know that businesses appreciate them. A little can go a long way when it comes to R&R. The rewards don’t have to be extravagant, but rather, have a meaningful impact. In the end, rewarding and recognizing your current customers generally provides a better customer experience, resulting in higher levels of loyalty and spend.
Retention is valuable to any business. While most executives are willing to admit this fact, too few act accordingly to keep their clients loyal. Unfortunately, there is no single magic bullet to drive customer retention. But by focusing on these three areas, you will have the confidence that you are on the right track. Make sure you implement these strategies to keep customers coming back for more!