The late Theodore Levitt, economist and legendary professor at Harvard Business School, memorably mused that, “People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.”
This saying really epitomizes the need to put a customer’s ultimate aspiration at the heart of what your company sells. After all, your customers aren’t likely to be drilling for drilling’s sake so perhaps it’s worth asking if what they’re really after is a study with walls covered in bookshelves for a quiet place to read.
In short, companies might gain a customer’s attention by offering the right tool, but to achieve customer retention they must help them build their dreams.
Analyzing the Sales Funnel
The benefits of customer retention and loyalty are clear: Bain and Co. linked a 5 percent increase in customer retention to an increase in company profitability of between 25 percent to 95 percent. They found that converting a new lead was 5 percent to 20 percent likely, while converting an existing customer into a repeat customer happened 60 percent to 70 percent of the time.
And although studies tout wildly varying results, the cost of acquiring a new customer can be anywhere from five to 25 times more expensive that retaining an existing one. What’s more, long-term, loyal customers also accrue lower operational costs, provide ongoing revenue and generate all-important referrals.
So why do so many organizations focus on filling the funnel with new prospects instead of nurturing existing customers?
Pay Attention to Retention
To prevent customer churn, organizations need to pay the term ‘customer-centric’ more than lip service. According to Zendesk, 40 percent of people began purchasing from a competitive brand because of its reputation for great customer service and 85 percent would pay up to 25 percent more to ensure a superior customer service experience.
What becomes increasingly evident is that beyond just a favorite product or service, loyalty is best built by establishing a relationship in which the company is a trusted advisor that can provide the kind of guidance that will make a customer successful.
This requires excellence in supporting a customer’s aspirations rather than just pursuing the sale. The companies that succeed in creating loyal long-term customers offer more than just a product and service: they provide memorable and differentiating customer experiences.
Personalization Builds Loyalty
For retention, customer experience management best practices come into play: Know your customer, know what they need and value, understand what plays into their customer satisfaction and personalize their experiences. For companies with global audiences, this includes tuning into locale-specific information (such as local holidays or events), culture and language.
In our data-rich era, many companies are well informed about customer purchase behavior and can easily gather customer data. The rubber hits the road — or should I say the drill makes the bookshelf — when this data is applied to websites, apps, customer support and all the aspects of the customer journey that extend beyond purchase.
3 Keys to Retaining Customer Relationships
Whether your business goal for retention is continued purchases or licensing revenue, customer advocacy or upselling, there are three elements that should consistently be part of any customer loyalty and retention strategy:
1. Use customer knowledge
Customer data of varying quality abounds. Sourcing customer data from the channels they use to capture their location and language, purchase habits, behavior, customer service interaction and data provides invaluable information to inform future marketing, sales, customer care and customer service actions.
This understanding may even include customer segments, such as premium customers, that promise the greatest ROI on future activities. And ideally, these insights drive a personalized customer’s experience across a brand’s channels is enhanced with custom content, offers and support.
2. Build an experience brand
Brand identity is really built on each moment a customer interacts with a brand’s website, app, other customers, customer support or product. Here, providing a consistent experience is paramount.
A customer that loves a product but has a terrible experience with customer service doesn’t particularly care that a different department is responsible. What they know is that they went to the app and not only couldn’t find any online help in the app but had to go to the website to find a link to customer support. Oh, and that it took customer service three days to get back to them.
Brands need to take into account what a customer loves and amplify this across channels and products, while also taking into account the pain points that customers have and addressing those directly.
Whether through customer support, product knowledge, supporting services or expertise, customer retention is about the long haul. It’s is about valuing what the customer values and exceeding their expectations.
Title image by Raquel Martínez