The importance of customer retention
“The purpose of business is to create and keep a customer” – Peter F Drucker. Businesses, especially when starting up, tend to focus on the first part of that statement – customer acquisition.
However, as important, is keeping those customers satisfied so that they come back for more and are happy to share their satisfaction with others.
Drucker, an American management consultant, educator and author, continues to say “…the purpose of a business is to create customers who create customers.” This is especially significant in a market where consumers often have greater trust in their friends and family than in marketing from companies. One of the by-products of social media and review sites is people look to their peers – or people like them – more for recommendations than probably any other time in history.
Increasingly, people will visit a Tripadvisor when travelling to a place, Yelp or, locally, Hellopeter, to share their experience with a business and, more often than not, it is when they have had a bad experience. Google also has a facility for reviewing businesses, which shows up in Google Search.
As per the Pareto Principle, or what is known as the “80/20 Rule”, often 80% of your business’ revenue will come from 20% of your customers, which further emphasises the importance of keeping your existing customers happy, thereby increasing their loyalty to your business.
If you haven’t already, now is the time to really hone in on who these customers are. While there are a number of customer relationship management (CRM) software packages available, the reality is that not everyone can invest in those in the current climate. There are multiple CRM plan templates available online, but the key elements that you need to consider in building your customer retention strategy are:
- Who are they?
This is beyond simply knowing their names but also understanding their needs and the context within which they purchase your products and/or services. This way you can also start to pre-empt their purchases with value-adds that speak to their needs.
- How are you interacting with them?
This includes who within your business interacts with them, how often this is done, and the methods of communication. This needs to be more deliberate but also not overbearing.
- What do they buy?
This is about understanding their purchasing history and the why behind that purchase, thus enabling you to anticipate and, by extension, fulfil their needs.
- How do they rate your service?
You can always do better. There are multiple tools, particularly digital ones, that enable you to get a sense of what customers are satisfied with and what they aren’t. You can use social media, digital polls and surveys or simply have a conversation with them.
The objective is to be able to gather as much information as you can on your customers, create a process for engaging with them regularly, and provide them with the products and services they require. And, once you have earned their loyalty, there are various mechanisms you can use to ensure that you retain it, including discounts, gifts and loyalty programmes.
It has been shown that, in the long run, it is cheaper to retain customers than it is to acquire new ones. So, pay close attention to customer retention.