Tough economies force businesses to reevaluate how they are spending their marketing dollars and efforts. When you can’t afford to waste time and money on random marketing tactics and inconsistent results, what do you do?
Recent research from Bain & Co. shows that a 5 percent increase in customer retention can increase profits by as 85-125 percent. That’s a pretty good return on investment (ROI) and should be your biggest area of focus. What are you doing to ensure that clients and customers keep coming back? It’s no longer a matter of simply doing a good job and working hard for the client. As consumers, we have too many options and very little time to make decisions. Therefore, we base decisions on trust – and trust is based on consistently positive experiences over time.
To a large degree, companies that sell products have it easier than businesses that sell services. Every time you walk past that little trinket you picked up at Artique or put on that little black dress you bought at Bella Rose, you are reminded of the store. When you’re on the golf course and crush a drive straight down the fairway with your new TaylorMade Burner driver, you know you made the right choice. A product can elicit wonderfully positive feelings that come when you use it.
Service firms are challenged to make the invisible tangible and valuable. For instance, what are you really buying from a financial planner? How do you know if the ad agency produced the absolute “best” advertisement? Would you have gotten a bigger settlement with another attorney? How much better is one consultant over the next? And is she really worth the fee?
The typical client can only evaluate whether the service was performed or not. It’s very difficult to judge the quality of a professional service; and who knows if another provider would have delivered the service any better? It’s hard to trust in things that you cannot see.
Ultimately, it’s the relationship that counts. I challenge you to think about how you will build deeper, stronger connections with your existing customers and clients. Most retail businesses have some form of loyalty program; unfortunately they rarely take into account the individual customer. Sure, Kroger gives me a discount when I use their ubiquitous Kroger Card, but saving a few bucks on groceries isn’t enough to build a relationship with me. Why aren’t they proactively recommending products that I might enjoy based on my buying habits? Why aren’t they letting me know when my daughter’s favorite snack is on sale?
One of the shining stars in customer loyalty is Amazon.com. They build customer relationships better than almost anyone does. And it works; they are the #1 American retailer on the web. They attract twice as many visitors as Walmart.com. On most Amazon product pages, there are 15 different elements that help to guide your buying decisions.
Here are just a few of the features through which Amazon.com acquires and leverages customer behavior:
- Five star ranking
- Customer reviews
- Add to your wishlist
- People who viewed this ended up buying…
- Customers who purchased this item also bought…
- Customer discussion forums
Amazon truly understands how to keep you on their site and how to keep you coming back for more. It costs you 5-7 times more to find a new customer than to retain an existing customer. This means that every dollar spent on marketing to your current client base will return 500 percent more profit than marketing to strangers.
Your customer list (and the knowledge contained within) is pure gold. One of the things that separate a loyalty-focused company from the pack is their ability to know and leverage customer information. I recently met with Executive Jet Management (EJM), a private jet charter company based in Cincinnati. For their VIP clients, EJM customizes each charter flight to the client’s preferences. They know if you prefer Diet Coke to Pepsi. They know if you like cashews over pretzels. If you’re an executive and your time is money, they know you’ll need Internet access while in air. While most private charters are experiencing slowing demand and higher operating expenses, EJM is doing pretty well.
We all love to feel appreciated, yet few companies do a good job of it. Trust and loyalty come from consistently positive experiences over time. It’s easy to fall into a rut when you see the same people come into your business every month. We’ve all been on the receiving end of poor customer service, long waits and unfulfilled promises from companies. We rarely complain, but we have lowered our expectations. Don’t be happy with “satisfied” customers. These are the ones that will happily go somewhere else when a better competitor comes along.
The best way to grow your business in a tough economy is by focusing on customer retention strategies. Start by taking better care of the people you’re already doing business with. Start by turning them into raving fans and they’ll take care of you.
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