Graziadio Business Report Blog

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 a guest post by Tim Berry, GBR Editorial Review Board member and President of Palo Alto Software

What? You say, reading my title here. Why would I want to? Here’s a question I received in the www.bplans.com Ask the Experts forum today:

My business sells window coverings and recently got taken by a client who decided to forgo paying for the balance due for product that was installed in his home. We often deal in large-value custom orders and need to protect ourselves in the future. What kind of agreement or contract can we use, and were can we find an example of something that will hold up in court? Should we use a lien agreement?

Ok wait. Let’s talk about this. Have you considered the impact on your business of asking all your customers to sign something like that? You’re selling window coverings. You have competition.

You just reminded me of my post last month The Heat, the Kitchen, and Credit Cards. I was mad at a customer who stole from us, and customer service for the credit card helped me out.

The active point in that was about the heat and the kitchen. You’re in business. You’re dealing with customers.

You have to decide whether the occasional bad apple is worth baking all of the apples as they come in.

Here’s a good exercise:

Continue reading ‘How to Protect Your Business From Customers’