In the downturn, preserving your profits means preserving your customers. Just try these client-retention tactics
Finding new customers is never a simple feat. In a recession, the task becomes downright nasty. But don’t let that depress your targets for 2004. There’s an easier way to boost sales
and profits in bad times or good.
How? By convincing current clients to send more business your way. And nothing shouts “”stick with us”” better than exceptional customer service.
Given the immense benefits of customer retention, it’s shocking how much energy some firms put into winning new clients. If you think new clients are the best clients, consider how much keeping good customers can benefit your business:
- Higher profitability. It costs more to find a new customer than to keep an existing customer. How much more depends on your industry, but it’s estimated that landing a new account costs five to 20 times more than selling into an existing relationship.
- Bigger revenues. Every time you lose a customer, it takes time to find a replacement. Meanwhile, your top line suffers.
- New business development. Reputation is central to your new-business development campaigns. It’s hard enough to open new doors without the stigma of a poor or non-existent reputation. A solid reputation and enthusiastic referrals from long-time customers are the tickets to fast growth.
Clearly, customer retention deserves all the attention you can give it – even at the expense of your efforts to attract new clients. To improve your customer retention, and create an environment where your customers will want to act as references, participate in case studies and purchase additional products or services from you, it’s crucial that you constantly monitor and measure your customer-service practices to determine what works and what doesn’t.
Here are some of the best practices of firms that excel in client retention:
- Measure your current status: A device I discovered a couple years ago is the ‘third-party interview’. Customers often will not tell you directly the things you most need to hear. However, they won’t be so reticent – or flattering – when a third party asks them for feedback. Considering hiring one of the many consulting companies or telemarketing firms that will conduct customer-satisfaction surveys on your behalf.
- Provide superior service: Find out what your competition does and out-service them. This may include implementing a 24-hour toll-free help line, building a value-added Web site, publishing a product newsletter or delivering customer-education seminars. Hire top-quality people for your customer service organization, and empower them with the training and responsibility to deliver great service. How will you fund these initiatives? Consider diverting some of your new-business development budget to customer retention.
- Know your customers: To serve a good client well (and to decide which clients deserve the best service), you have to understand how they operate, who makes their decisions and what is their strategic direction. Your salespeople can collect this information by writing up account plans for your largest or most profitable accounts (those in the top 30 per cent). Include a review of the client’s industry, the client’s revenue projections, how you are positioned in the industry, threats to your position, a plan to expand within the account, your most recent customer-satisfaction results, a plan for building and maintaining executive relationships, etc. Ask your salespeople to review the plan with your executives to get additional insights on how to maximize the opportunities presented.
- Pay better: No, you don’t have to pay your salespeople more. However, too many companies offer generous rewards for new-business development, while providing no tangible incentive to maintain and strengthen existing customer relationships. Ensure your compensation scheme is in line with your customer-retention goals.
- Show appreciation: Recognize your top customers with client-appreciation parties, gifts, personal notes, and so on. Don’t treat all customers equally: follow the 80/20 rule.
- Adopt your customer’s goals: Customers will value you more if you’re fundamental to their success. For example, if you’re a manufacturer that sells to retailers, give those retailers tools that can help them sell your product to their customers, such as point-of-purchase displays. Their success is your success.
- Have an escalation procedure: Front-line employees can’t solve every customer problem, so let them know who they should contact for help, such as a product manager or senior technician.
Selling successfully in today’s tough market is critical to your company’s long-term success. Focus your sales and service efforts on existing customers, and selling becomes a lot easier.
Colleen Francis is a certified sales professional advisor. You can catch her on the Web at www.engageselling.com.