Customer Retention: Challenge or Opportunity?
Ali Cudby is the founder of Your Iconic Brand.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIt’s a great feeling to win a new customer. It’s equally frustrating to lose a customer your company has spent time, energy and money to acquire. Especially when that customer leaves before they even become profitable.
While companies often have robust ways to support getting new customers, they often don’t apply the same dedication to keeping their customers after the triumph of acquisition.
On some level, it’s understandable when companies prioritize new customer acquisition. After all, customer acquisition is easy to track and measure. You didn’t have a customer, and then you did. You can mark the moment – bang a gong, throw a party, and count the sweet, sweet revenue.
Plus, in most companies, there’s usually one person who owns customer acquisition as part of their role. A salesperson will have a revenue target and a list of prospects. It’s their job to land those clients.
Yet customer retention is the best way to grow a company. A study by consultants at Bain & Co. determined that reducing customer turnover by a mere 5% leads to increases in profitability by anywhere from 25% to a whopping 95%.
Not only that, a customer that stays with your company longer is more inclined to share positive word-of-mouth in comparison to a customer who churns. Any time your company increases the risk of negative word-of-mouth it creates another potential barrier to growth.
Improved customer retention leads to long-term customers who are highly profitable and increases your chances of spreading good reviews of your company.
Of course, there’s always going to be some customer turnover. I was talking to an executive recently who was fixated on one customer who left the company. This wasn’t simply a case of trying to learn from mistakes in order to get better in the future – he was angry that the customer churned. I couldn’t help but wonder how the anger would help the company reach its goals.
You can’t eliminate customer turnover – but the results are worth the effort.
In Max Yoder’s excellent book, Do Better Work, he shares a valuable insight by suggesting that we “look for opportunity.” What the Lessonly CEO means is that challenges in business will happen. They’re inescapable. By contrast, how you respond to those challenges is a choice. You can decide to look at them as a threat (“this is really bad”) or as an opportunity (“I can do this better”). The opportunity mindset turns a problem into a positive.
Customer turnover could be perceived as a challenge.
After all, the customer relationship gets more complex after the moment of purchase. Instead of a single salesperson being responsible for the customer, several people across multiple departments are now involved. They all have a stake in the relationship. It’s hard to know if a customer’s level of happiness is tied to their engagement with the product, the people at your company, a change at the customer’s company, or something else entirely.
This complexity means there’s often no single person being held accountable for customer retention as part of their job.
Will you see that as a challenge? As Yoder’s book reveals, when companies employ a growth mindset, they’ll see customer retention as an opportunity instead of a challenge.
To jump on that opportunity, here is a simple three-step process you can follow to align your company for retention.
First, assess your company’s current reality and identify the places where customer relationships are falling through the cracks.
Second, create a clear process for customer retention that addresses any gap areas, so your company has a plan that can be followed. As you establish your process, assign clear responsibilities, so team members know precisely which elements of the customer relationship they are responsible for managing.
Finally, provide the support your team needs to execute the plan consistently over time. Employees need to know this isn’t going to be a “flavor of the month” initiative from management. You show that by providing resources for long-term success, along with measurable expectations that you use to hold employees accountable.
Follow these three steps to activate your company’s opportunity to improve retention and enjoy the benefits of long-term, highly profitable customers.
Ali Cudby is the CEO of Your Iconic Brand and an adjunct professor of Entrepreneurship at Purdue University.