This blog is part of our Ask the Expert series on improving the customer journey by evaluating and improving customer interactions across various touch points within your organization.
One of the biggest costs any business has is attracting new customers.
The White House Office of Consumer Affairs states that attracting a new customer is 6 to 7 times more expensive than retaining and growing existing customers. Meanwhile, according to research from the Harvard Business Review, increasing retention of existing customers by as little as 5%, can increase revenues by as high as 95%.
Clearly, customer acquisition and customer retention is a hot topic on an organization’s quest to generate more revenue. I sat down with Megan Thomas, Sr. Director of Marketing, and Michael Porreca, Director of Business Intelligence and Analytics, to discuss.
Q: What symptoms prompt an organization to focus on customer retention?
A: MT - The simplest way to know there’s a problem is to look at sales growth trends. Going up? Going down? Pretty flat? According to a recent study by Forrester, 89% of customers have stopped doing business with a company after just one poor customer experience. If growth is stagnant or declining, existing customers aren’t having a good experience.
When customers are not having a good experience, every other metric in a business will show a similar trend. Cost of sales goes up, margins go down, employees are less happy and customer complaints go through the roof.
There are many reasons why this can happen, from having an outdated product to not focusing on the right customers. What you need to really understand is WHY. Why are existing customers going elsewhere? Why aren’t you growing?
Q: What makes addressing customer retention so difficult?
A: MT – First, it can be difficult to access good data in a systematic way about why customers leave in order to diagnose the root cause. Second, it may be tricky to determine which customers are in your ideal customer segment in order to focus retention efforts. Ultimately, all customers are important, but for most businesses, there is a sweet spot of customers who are more profitable than others.
A: MP - The first challenge in solving a customer retention problem is acknowledging that it exists. Many fail to recognize the problem until it’s running rampant. It comes down to knowing what you want the business outcome to be, knowing what the drivers are and being able to measure and track progress.
Attracting and providing a solution to a new customer is much more expensive that providing the same solution to an existing customer. One of an organization’s most valuable assets is their customer base, yet very few organizations actually measure and track that customer experience in an objective fashion. Instead, executives spend hours thrashing through spreadsheets looking for ways to grow the business and attract new customers, while a large number of customers may be going elsewhere. Instead, they should be measuring and tracking everything associated with customer experience, which is the primary driver for customer retention and turnover.
Q: What are some of the benefits of focusing on customer retention?
A: MT - Taking care of customers is vital. By focusing on customer needs, building advocacy and offering occasional ‘moments of joy’ the need to spend an abundance of money to attract new customers goes down, existing customers are less price-sensitive and loyal customers provide feedback and are more likely to make referrals.
Spending the extra time and energy to get it right and keep getting it right can build life-long bonds with customers.
Q: When you’ve identified your ideal customers and those you want to retain, what do you do with that information?
A: MT - Getting to the right data and making sure it’s reliable information is just one hurdle. You need to put it to work. For most B2B companies, employees in various functions ‘own’ the customer experience, from sales to marketing, delivery, accounting and more.
This is a blessing and a curse. You have many opportunities to create relationships and stickiness with your customer base, but providing a consistent experience can be tricky. You need to use data to understand pain-points and develop a process to monitor progress, adjusting as necessary. Design an experience that meets the wants, needs and expectations for your ideal customer segment. It’s all about data, prioritization and focus.
Q: How can business intelligence help?
A: MP - Customer retention comes down to data. You need to understand what is happening, so you can measure, track trends and evaluate. That’s when you can make a change.
To do this, you need:
- Actionable data to understand who their customers are, what they are spending, how frequently and how recently
- To identify objective ways to measure the customer experience, in order to build in data-driven early warning indicators of customer issues as they begin to surface so that they can be immediately addressed
- To support behavior alignment with tools and technology that make it easy to delight customers
Is your organization having challenges with customer acquisition and retention, and digging through the data?
Our Business Consulting team can work with you to design an optimal customer experience to attract, engage and retain customers. We also have expertise in Essential Customer Metrics, Sales Confidence Indicators and Business Intelligence & Analytics tools for reporting and analysis.