If you’re in marketing, you probably spend a lot of time and money trying to generate and nurture new leads, to bring new customers into your business. That is as it should be, and a reasonable strategy to increase profits and grow your business.
Unfortunately, marketing too often is viewed as a zero-sum game, and it’s too often the case that in attempting to garner new customers, you inadvertently short shrift those you already have—and that can be a costly mistake. Consider these metrics gathered by SuperOffice, for example:
- Increasing customer retention by as little as 5% will, on average, increase your profitably by 75% (Bain and Company)
- Approximately 80% of future revenue for your business will be from 20% of the customers you have now (Gartner)
- It’s requires about 50% less resources to sell to existing customers than to new ones (Marketing Metrics)
Said differently, an effective strategy to boost customer retention will increase your conversion rates, reduce the cost of marketing and increase your profit. The question, then, is not whether you should work to improve retention, but rather how best to do it.
Why Do Customers Leave?
Before hitting on the most effective strategies to persuade customers to stay, you first need to understand what it is that moves them to leave. Surprisingly, it’s not typically because they don’t like your products and/or services anymore (though this myth persists). In fact, the overriding reason for customer attrition, accounting for almost 70% of departures, is their growing conviction that a business doesn’t care about them. That’s by a wide margin more impactful than dissatisfaction with the customer service you provide, or being persuaded by a competitor that you aren’t as good as they are.
So, How Can You Show Them You Care?
Not surprisingly, some of the ways to show customers you care are not that dissimilar from the ways you accomplish that goal with anyone else in your life, like friends and family. That means, among other things, remaining vigilant and listening. It might also mean working with some good CRM software to ensure you know what your customers care about, and what their history with your business has been.
That said, here are 5 smart strategies to increase customer retention and, by extension, your profits:
- Train Yourself to Spot the Red Flags
If your spouse or significant other were increasingly unhappy with you and perhaps looking for the exit door, odds are you’d see some warning signs—like spending more time away from home, or not confiding in you like they used to. The same is true with your customers. Those who are considering leaving your business might, if you were paying attention, be telling you so by not buying as many products as they used to, or maybe they’re increasingly calling customer service to complain.
The trick is to be able to spot these kinds of trends before it’s too late. That can be where your CRM software can be a lifesaver. Make a habit, first, of identifying who your most loyal customers are and, second, regularly observing key metrics, like those related to purchase patterns, to know which customers among this group might be at risk of leaving your business.
- Do Something Nice for Them
So, now that you know who might not be as satisfied as they used to be, what do you do next? Arguably, the best thing you can do for someone who’s beginning to think you don’t care about them is to show that you care.
That could mean sending them incentives, like special offers and discounts. You might, for example, compile a list of everyone who subscribes to an email newsletter but hasn’t made a purchase for some time, and send such loyalty rewards or similar incentives (signs that you care about them and their business).
- Pay Special Attention to the Customers Who Buy the Most
Especially if you use a tool like CRM, you should easily be able to identify which customers are principally responsible for your profitability. You should focus more of your marketing and other resources on these customers. For example, if you’re going to offer rewards and incentives, give them first to those whose absence would be most detrimental to your business.
- Get Personal
In August 2016 Walmart acquired Jet.com for $3.3 billion. Jet’s ascendancy, as reflected in that acquisition, was dramatic and rapid. One of the reasons for the company’s success was its focus not just on outstanding “customer service,” but on creating personal connections with its customers. For example, when Jet made a mistake with a grocery order and a customer complained, one of the customer service reps would email them, telling them who they (the rep) were, including what their personal interests were. In other words, they created a credible, personal connection, one which demonstrated that they truly care when it mattered most.
That’s the kind of service that transforms a customer complaint into an opportunity to build trust. The days are over when customer service can be just adequate. You need to work to exceed your customers’ expectations to ensure their loyalty over the long haul.
- Spend Some Time Together
If someone tells you they care, but they haven’t called or written in ages, you’ll probably conclude they’ve forgotten about you. That’s how your customers feel when weeks or months go by without any communication from you. Use your CRM to schedule regular communications with your best customers. Even more important, if you promise to do something, make sure you do it. Nothing will kill a relationship quicker than promises that go unfulfilled.
Retaining customers means more to your business than continuing to sell products and services, although this alone is good reason to make the effort. It also means they’re out there saying nice things about your business, and that will help you grow your customer base. The time and money you spend demonstrating that you care about them and their lives will be well worth the investment in the long run.
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.