February 1, 2023
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In an increasingly competitive market, companies everywhere are looking to reduce customer churn, or the rate at which a customer stops purchasing with a company during a set period of time. In other words: losing customers. This can be caused by various factors including product quality, price increases, poor customer experience, reduced perception of product/service value, among others. Unfortunately, when customers leave, it’s often too late to get down to the real reason they’re going in a different direction, leaving you with an unidentified problem and at-risk for more turnover for that same reason. Fortunately, you can get ahead of it. Your competition is getting savvier, so the question becomes - what are you going to do about it?
Whether the solution to a company’s turnover woes is adjusting pricing, improving customer service, or shifting messaging to address challenges current customers are facing, if there is not a customer retention management plan in place and companies are not adjusting their marketing strategy based on feedback, customers will continue to seek help from competitors.
Let’s face it. All companies lose customers – It’s part of the game. But the fact of the matter is, customer retention is vital to company success, and marketing is critical to customer retention.
Often in businesses we work with, CEO’s or other members of the leadership team, get laser-focused on a customer acquisition strategy. New leads, new leads, new leads! That’s great, we do need to talk to strangers and we need new customers to grow market share. But in certain businesses, customer retention strategies should be just as important.
With one of my recent clients, we did an exercise to calculate the lifetime value of a customer. What we discovered was that customers are 10% more profitable every consecutive year. So in year three, these current customers are now 30% more profitable. On a high-priced product or service, this makes an incredible difference to the company’s profitability. So then the question becomes, what needs to be done to retain these current customers? And how much of our marketing budget needs to be allocated to retaining customers and acquiring new ones? A challenge I enjoy.
In this chart from Gartner, I am most focused on the 31% of loyal customers who still trade down. These loyal customers are defined as customers who have been buying from you for a long time, but due to certain factors, have decided to seek less expensive alternatives. Those customers might be the easiest to sway depending on what they “actually buy” and not what you might be selling. How are you finding out what’s important to them and what they are actually buying? And are you regularly building these relationships by doing touch-ins and showing how valuable they are to your business? I have two options to help with this:
Hire an outside company to speak with actual customers and find out what they find most valuable, what they are lacking from the relationship, and if they are a true raving fan (loyal). BlueByrd has executed dozens of voice of customer research projects. In fact, we like to do it before we kick off any engagement so we can get ahead of the conversation to find out what the customers value and find different about your business.
Tangent: product managers, or very technical people, when asked “tell me about your product” will often start by telling us about the shiny features and benefits. Don’t get me wrong, I love features and benefits and how the product actually works. BUT - that is not always what the customer is buying. They could be buying peace of mind, efficiency, a guarantee, or whatever it is that the solution provides for them from a physcological standpoint.
Doing a regular check-in on your customers can give you more information than you might think. It’s relatively inexpensive to use a service like SurveyMonkey or TypeForm to gather information. Asking the right questions is important and should be thought through. In 2017 I started working for an Occupational Medicine service provider, and they were doing very little to collect customer feedback or data. With nearly 50 clinics, they were unsure of patient interactions, how the staff was performing, and if people were likely to come back or not. Upon implementing an online customer satisfaction survey, we set up a text message automation so an hour after someone’s visit, they would receive a text message with a link to a survey to share their experience. What we found was that 88% of the interactions were incredibly positive. They actually had a very high Net Promoter Score (NPS). The results were reassuring and helpful to get specific feedback. Compared to the paper survey they had in the clinics, this automated online survey increased survey responses by a whopping 800%!
The point is, if you are getting feedback directly from the customer, you can fix the issues and continue doing what they value most. Don’t be afraid to hear what the customer has to say, embrace it.
Once you have customer feedback, you can use it to boost retention and gain new customers.
You may not be able to win over every single customer, especially in commodity-priced businesses. Understanding your customer and why they buy will give you a massive advantage. Once you know what they value, you can use that to maintain and grow the relationship. BlueByrd can support these initiatives and give you some practical advice on what your next steps should be.
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