Graziadio Business Report Blog

This is the last of a series of four blogs devoted to the topic of customer retention. Read Part 1, Part 2 and Part 3.

The key to competing for retention is to quantify and understand the connections between loyalty and profits.

How to use measurements as tools to ensure integrity, accountability and decision-making relative to the development and implementation of your customer retention program is one of the most important considerations to retain customers.

Keep your tracking systems relevant and flexible so they function as assets to building and refining your retention strategy.
Finally, close the customer partnership loop with effective communication activities.

Critical measurements and Calculations

1. Know your customers.
   • Determine the true cost of each type of customer, from loyal to transient.
   • Compile a customer baseline and data base.
   • Employees are customers: Measure their service performance. Continue reading ‘Retaining Customers Part IV: Parting Comments’

This is the third of a series of four blogs devoted to the topic of customer retention. Read Part 1 and Part 2.

Every customer that you keep represents at least three that you don’t have to attract. Numerous research studies indicate that the cost of acquiring a new customer usually runs from two to four times the annual cost of keeping an existing customer. Obviously, an effective customer retention strategy translates into profits.

It has been estimated that most companies spend about 98 percent of their time reacting to problems and less than 2 percent preventing them. The first, most important, way to prevent customer defections is to identify and define each problem from the customer’s vantage point. This blog suggests several ways to retain customers once you understand the problems and their ramifications.

Superior service and database management provide your best defense against customer defections. Service provides the opportunity to solve customer problems and build partnerships; the database serves as a vehicle to personalize customer communication and enhance your relationships.

Establish a Customer Baseline

In order to develop a successful retention program, you must have accurate and complete information about your customers. In my experience, at least 5 percent of the information in a typical customer database is inaccurate. Errors translate into wasted money, customer aggravation and loss of credibility.

You should know the following basic information about your customer base: Continue reading ‘Retaining Customers Part III: Invest to Prevent Customer Defections’

This is the second of a series of four blogs devoted to the topic of customer retention. To read Part 1, click here.

Employees get excited when management demonstrates a serious commitment to listening to customers and staff’s suggestions for serving them. Building customer loyalty is everyone’s responsibility and everyone’s input is critical. Sharing information is as critical as collecting it: Empowered employees delight in delivering superior personalized service.

Author Peter Drucker points out that, “When people are held responsible, they act responsibly.”

How can you hire terrific, responsible employees?

• Articulate clearly your company values.
• Identify the aspects of a customer service attitude you desire.
• Interview and screen to elicit information about alignment of the person’s philosophical attitudes, principles, values and behaviors with your priorities. Look for employees who like to deal with people.
• Train employees about your corporate philosophy, product knowledge and productivity skills. Continue reading ‘Retaining Customers Part II: The Flight of the “Service Zombies”’

This is the first of a four-piece series devoted to the topic of customer retention. Here, I will talk about retention, what it is, and why it drives successful business operations. The three subsequent blogs will present a conceptual framework for issues, rationale, cost models, and examples for use in developing and maintaining a loyal and profitable customer-base.

Never, never, never take a customer for granted — I mean it!

Throughout the past year, I have written about customer satisfaction and its permutations (customer loyalty, customer partnerships, customer bonding, tracking and measurements and employee loyalty). Now I want to talk about customer retention: the key to profitability and longevity.

The importance of retention becomes evident once you understand clearly the relationship between customer loyalty and profits. Some large companies estimate that as much as 95 percent of their profits derive from long-term customers. Many other companies know that a mere 5 percent decrease in customer defections can boost profits any where from 25 percent to 95 percent.

The decision to cultivate a highly loyal customer base must be integral to all aspects of a company’s business strategy. You must know who your best customers are and what it takes to keep them. Then, you must meet, exceed and anticipate their needs better than the competition and give them reasons to buy more.

Retention depends on what customers actually do, not necessarily on what they say they will do. Continue reading ‘Retaining Customers (Part 1 of 4)’