"Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them."
W. Edwards Deming
Today the world of business has become fiercely competitive. Organizations are continuously looking to differentiate themselves to gain competitive advantage and increase their market share. In this race to increase the customer base, organizations are focusing more on sales and marketing activities. However, a sale is just the beginning and not the end. What the customer experiences throughout the delivery process are important. The on-boarding experience, product/service experience, fulfilling value contract, customer success, and delight are critical factors that will have a positive or negative impact on the customer retention rate.
Providing great customer experience and value is important for customer retention and growing the business. Customer experience is an important competitive advantage to drive sales and increase revenue. It is predicted that in 2020, customer experience will surpass price and products as the primary brand differentiator. Customers today have plenty of options to choose from to meet their demands. A single poor experience is enough for customers to decide to look for alternate options. As per research,
- 32% of all customers would stop doing business with a brand they loved after one bad experience. (PWC)
- 42% of respondents have left a business due to poor customer service. (New Voice Media)
- A customer is 4 times more likely to defect to a competitor if the problem is service-related than price- or product-related. (Bain & Company)
“Customer is King”, an age-old business mantra is about understanding the importance of customers and providing exceptional service to the customers. Every organization should implement plans to deliver superior customer service and experience. Additionally, focus on delivering extraordinary value to the customers. More the value the customers get, the less is the risk of churn percentage. As per statistics,
- Brands with superior customer experience bring in 7 times more revenue than competitors that lag in customer experience.
- Customer-centric companies are 60% more profitable than companies that don’t focus on customers.
As per Bain & Company, the cost of acquiring a new customer is 6-7 times more than retaining an existing one. Organizations investing in customer retention have benefited immensely and successfully grown their business. It is a no-brainer that customer retention is a key revenue driver that cannot be ignored by organizations. As per research,
- Increasing customer retention by just 5% boosts profits by 25% to 95%. Harvard Business school
- The probability of selling to an existing customer is 60%-70%. The probability of selling to a new prospect is 5%-20%. Marketing Metrics
- 65% of a company’s business comes from existing customers. Customer Service Institute
Most often, organizations are so focused on acquiring new customers that they fail to effectively fulfill the needs of existing customers. Focusing only to acquire new customers and not investing in customer retention will only increase the customer churn rate and can lead to the downfall of any organization. Investing in customer retention should be an integral part of organizational strategy to have a greater impact on the top-line & bottom-line revenue. Leaders should become the catalyst for change in implementing systems, procedures, and processes that lead to customer retention.
The simplest way to increase your customer base is not to lose them. Here are 5 ways to improve customer retention.
Expectations – It all begins with setting realistic expectations with the customer. It is important to know your limits. Winning a customer by over-committing on the deliverables will only lead to double trouble. Doing so will create tremendous pressure on the team to meet the deliverables, leading to an unpleasant environment within the organization. Situations like these lead to customer dissatisfaction due to poor quality of the product/service or unable to deliver as promised. Hence, it is imperative that organizations have a clear understanding of their capabilities and capacity. This will help in setting clear and realistic expectations with the customers and avoid any impact on service delivery.
Relationship – According to Marketingwizdom, the average business loses around 20% of its customers annually simply by failing to attend customer relationships. The process of building a relationship starts at the very beginning of the sales process. The objective here should be to create a positive first impression. The next step is to gain the confidence and trust of the customers by consistently delivering quality products and services as promised. Continue to strengthen the trust factor by collaborating and engaging regularly to show them that you care, build connections, and strengthen the relationship. Above all, it is important to understand your customer value. Always listen to what the customer is saying or asking for and change your strategy to meet their expectations.
Value – Understanding customers is the first step to consistently be successful in adding value to your customers. Knowing customers in-and-out enables organizations to enhance the customer journey and experience. Focus on the quality of the product or service that is exceptionally better than the competitors. Quality of the product or service is a critical element that the customer perceives. Invest in enhancing the product or service that benefits the customer to improve their organization’s performance. Go all-out and implement a robust process to provide superior customer service to resolve customer issues. In today’s fast-changing marketplace, organizations are focusing on improving customer service to gain a competitive advantage. Consistently keep a tab on the customer needs by soliciting their feedback and use the information to continue to add value to the customer. The key to adding value is to always consider the customer’s perspective and focus on customer needs.
Experience – Customer expectations are skyrocketing, and they expect the best experience every time. As per statistics, customers that rate organizations with high customer experience score spend 140% more and remain loyal for up to 6 years. Hence it is imperative to develop a customer experience strategy that is customer-focused and communicated clearly within the organization. Providing an unforgettable and positive experience is essential to build a brand reputation and gain more business. Take customer feedback on every interaction. These inputs are critical to identifying gaps and building a robust customer-facing team. Make effective use of tools and technologies to increase efficiency and customer engagement. Another key element is to create an emotional connect and create a bond.
Track – It is important to keep track of key metrics to measure performance for customer experience and retention to know if all the investments in people, process & technology are paying off. Without monitoring the metrics, there is no scope of improvement. Use metrics viz. NPS (Net promoter Score), CSAT (Customer Satisfaction Score), and CES (Customer Effort Score) to track customer experience. Some of the key metrics to track customer retention are viz. customer churn rate, retention rate, average customer life, revenue churn rate. Additionally, track metrics to gauge operational performance that influences the customer experience.
Irrespective of the industry, your customers are the most valuable stakeholders. It is essential to invest in building a sustainable long-term relationship with the customer. Customer service and experience without any doubt are the key factors to retain customers. Hence, it is important for organizations to make customer satisfaction as part of their strategy and constantly improve business operations to have higher customer retention.