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The Importance of Customer Retention for Business Success

So many businesses work hard at finding new customers to sustain or grow their business. The reality is, it is harder and takes more effort to find new customers versus retaining existing ones. Simply put, you can’t underestimate the importance of customer retention.

The process has to begin with analytics to learn your current customer retention rate and why customers leave. Knowing the average spend and length of loyalty of a customer will determine the lifetime value to your business. This can be compared to the industry norm within the same geographical area (in case climate and economics play a role).

According to SAS Canada, 50% of consumers say three or fewer brands provide a high level of customer satisfaction. In comparison, 87% of brands say they provide the highest level of satisfaction to drive loyalty—clearly, there is a disconnect here!

If a disconnect exists between perception and reality, why not ask the customer directly? There are many ways to do this, including online survey software. This really is the best way to gain the valuable insights businesses need to create a customer retention action plan and enhance business growth.

Although not as convenient, focus groups is another popular method to gain customer feedback, and this method encourages the interaction and subsequent dialogue between people. Focus groups are often used before launching a product to market too.

Increasing Customer Retention

A few things to consider when analyzing areas of opportunity to increase customer retention:

  • Does a “thank you” campaign exist to show appreciation for using services?
  • Is there a customer service standard in place that is truly remarkable and measurable?
  • When customers bring complaints or concerns forward, how are they addressed?
  • Do customers feel like they are part of a “community” through websites, social media and shared testimonials?
  • Is there a personalized approach to promote an emotional connection by the last touchpoint employee?
  • What are the value-added products or services that can make a customer feel they received a perk?
  • Does a robust customer loyalty program exist that is viewed internally as an investment, not a cost?
  • Today’s customer expects a true experience when making a purchase; does your product or service offer that?

Of course, it is important to know what your business reputation is within the local industry. And whether there is an obvious brand associated with your business. Customers, and employees, expect a business to have a social responsibility initiative or several, so this is another important consideration.

Speaking of great customer service, we cover how to deliver quality service in this post.

Invest Training to Boost Customer Retention

One might think corporate culture is strictly internal. But the stronger a corporate culture, the more effective employees are delivering a positive experience. Customers feel that.

Every business should invest in a training program that addresses leadership effectiveness, employee collaboration, team building and overcoming conflict since these areas play an important role in culture. Leadership must lead by example, and ideally, participate in the training.

Depending on the nature of the business, customers can lapse, but this isn’t always because they move to a competitor. But rather because they no longer need the service, skill, or product. That does not mean they should be forgotten, though.

Another important training area is customer service. Generally, employees want to do well but do not always have the knowledge, confidence or experience to do so. That is when training can help. Follow up on training with performance indicators to ensure each team member starts with a benchmark and something to strive for.

Lapsed customers will come back. That is if a business stays in touch.

Consider a “We miss you campaign” with a giveaway of value-, or value-added service, that relates to the business. It is so rare that one receives an actual item of value from a past business that this campaign can also serve as an excellent source of referrals. When a business does something unique or unusual, people talk and tell friends!

A word of caution, however. If you feel you have too many difficult customers, re-examine a few areas, since it may have more to do with Policies and Procedures that people:

  • Is it possible you have too many restrictive policies in place that may frustrate customers?
  • Is the level of employee training up to standard?
  • Are employees given the autonomy necessary to appease customers?
  • Has the workforce received the appropriate customer training required to ensure service levels are remarkable?
  • Are department leaders being coached to ensure the internal culture engages and recognizes initiative?
  • Can leadership identify where customer service fits into the strategic plan?

Understanding Customer Priority

Consider the order of customer priority:

  • Retention, and how this is measured
  • Bring back lapsed customers and measuring each campaign
  • Acquire new customers through referrals from existing ones
  • Source new customers through effective marketing campaigns

Ask customers why they selected your business early in the relationship, and ask again what keeps them loyal once you have an established relationship. Typically, people, who are also your customers, do not mind answering surveys if they know you are genuinely interested.

Some products or services are best offered by the same employee, as often as is possible. With many industries experiencing high turnover, consider the possibilities of customers following employees to a new place of work, of just getting uncomfortable being served by too many different people.

Speaking of competition, here are five customer service skills to master to help you stand out from yours.

Try Rewarding Customer Loyalty

Studies show it is five to six times costlier to acquire a new customer than to retain an existing one. Reward customers for loyalty with initiatives such as:

  • Anniversary of first purchase
  • Birthday recognition
  • Customer appreciation events
  • Special offers for loyal customers

The topic of customer retention and acquisition is a popular one. As a business owner, the important thing is to look at your results and consider how to prioritize retention versus acquisition for more sustainable business growth, and ultimately, profitability.

Kris is a business mentor, an executive coach, a strategist and an innovator in developing a corporate culture that leads to customer retention and, ultimately, profitability. She loves working with entrepreneurs who value business growth and sustainability.

Kris works with X5 Management to offer training solutions and help businesses improve communication, teamwork, customer service, sales and leadership development. These areas are always tailored to suit the specific business needs.

Customer service is the one thing that any business can control, 24/7, 365 days a year. Taking the time and attention to strengthen your team’s soft skills is critical.

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