CRM: Customer Acquisition is Nice, but Retention is Key to ROI

4 minute read
Chris Bucholtz avatar

Why do you buy customer relationship management (CRM) software? In most cases it’s because you have an issue in the sales department that’s screaming for attention. Forecasting may be going awry, lead data may be loose and impossible to locate, or your sales team is no longer able to discover best practices in selling.

That’s all important stuff -- but it may not be the best reason to adopt a CRM application, especially in these economic tough times.

The reality is in the acronym -- specifically, in that middle word: relationship. CRM is about knowing about prospects -- who they are, how they’ve been marketed to and how they’ve responded to your marketing, and so on. But then, if all goes well, you actually sell something to them, and that’s when the magic really starts.

Long Term Vision

That magic is all about retention. The sales opens the door to deepening the relationship, to building increased rapport, to behaving more as a trusted advisor -- and to converting all these efforts into greater sales over time. And we all know that keeping customers is less expensive than acquiring new ones. In fact, it’s more lucrative. According to Karl Stark and Bill Stewart, a business that can retain all of its customers by just one additional month can achieve an additional 3 percent of annual growth. If it can retain its customer base for four additional months, it can create double-digit growth without acquiring a single new customer.

Acquisition is the shiny, pretty thing in sales. Land a new customer, especially a big one, and it’s champagne and a nice dinner, a pat on the back from the VP of sales and a shout-out from the CEO at the next all hands.

What do you get for retaining a customer? Well, that’s what you should be doing anyway, right? So how about a nice big bag of bupkis?

This is really the wrong mentality in what is increasingly becoming a more subscription-like economy. Those renewing and returning customers are the ones who are going to make or break your business, and in times of recession they’ll be the ones who allow you to survive the valleys on your way back to the peaks.

CRM's Role in Customer Retention

CRM helps with this in two ways, neither of which revolves around those acquisition issues that may have driven your initial purchase. Most immediately is its ability to provide service and support people with a view of the customer to help ease them through service issues.

CRM allows you to develop standard practices for the most frequent problems, and equips your people with information about the customer circumstances to give them the best shot at seamlessly dealing with the exceptions. Think the 80/20 rule here -- 80 percent of requests are the same-old same-old, while 20 really require hands-on effort. Those efforts will be a lot easier if you can give service personnel a snapshot of the customer’s history with you, his or her purchases, and a record of past service interactions.


Learning Opportunities

The second area where CRM can help you hang on to customers is in marketing. CRM applications are often somewhat weak in their marketing automation capabilities, but they’re still your best bet for managing information and moving it to where it’s needed inside your organization.

So, if marketing is using an automation tool to reach existing customers -- and by all means, creating touch points with customers on a regular basis that are geared toward providing customers with helpful, timely information is something the marketing team should be doing -- CRM can collect this information and allow you to score it to indicate when those existing customers will be ready to buy again.

This cycle of sales-support-marketing-back-to-sales is what people mean when they talk about CRM breaking down silos within the organization. Sadly, most CRM implementations tend to stop at the borders of the sales department, and even worse, cease around the idea of acquisition.

If you really want to realize the true value out of your CRM application and wring the most revenue from an increasingly loyal audience of customers -- it’s critical that retention gets the attention it deserves.

Image courtesy of EtiAmmos (Shutterstock)

Editor's Note: Interested in other thoughts about CRM from Chris? Try CRM: The Most Important Relationship is with the Customer, Not the Data


About the author

Chris Bucholtz

Chris Bucholtz is content marketing manager at CallidusCloud (www.calliduscloud.com), the session chairman of C3 2015 (http://calliduscloudconnections.com/) and the past editor in chief of the CRM Outsiders, Forecasting Clouds and InsideCRM. A journalist based in the San Francisco Bay Area, he's been covering technology and customers for over 19 years.