7 Tips to Increase Profitability by Retaining Customers
Pareto’s principle is that businesses get 80 percent of business from 20 percent of their clients, meaning that retention of these customers is crucial to success. According to a study conducted by Harvard Business School, “The high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line: increasing customer retention rates by 5% increases profits by 25% to 95%.”
Research conducted by the U.S. Chamber of Commerce and the U.S. Small Business Administration revealed: “Businesses could greatly improve their customer base if they focused more on retaining customers than spending marketing budget funds to get new customers.” Numerous studies have shown it takes more money to acquire a new customer than it does to retain a current client. Here are some additional statistics:
- The average U.S. business loses 50% of its customers every five years.
- It costs six to seven times more to find new clients than it does to keep existing clients.
- Bain Co. states; a 10 percent increase in customer retention is equal to a 30% increase in company value.
- You are four times more likely to do business with an existing customer versus a new customer.
- The probability of selling to an existing customer is 60 to 70% versus 5 to 20% to a new customer.
To help you improve customer retention, we’ve compiled the following seven tips for small businesses to identify, engage and retain valuable customers.
1. Set expectations early
Businesses should build strong and trustworthy relationships from the start. For example, when your team delivers faster or more than promised, you build a foundation of excellent service delivery. You can reinforce this by responding quickly to questions, maintaining a record of communication and commitments and exceeding expectations. You should go even further with the quality of your after-sales service and support.
2. Involve your customers in all decisions
Many times, just involving your customers before going ahead with decisions saves time and effort required later to make fixes. Any change in operations or strategy is likely to be more successful when it is accepted and endorsed in advance by your clients. So why not involve them and get their input while planning? Surveys are one of the best tools to measure your clients’ satisfaction levels if used properly. Here are some tips to design survey questions that lead to actionable insights:
- Define customer satisfaction parameters and ask questions around each. To illustrate, a voice call software application provider needs to ask questions on the quality of calls, bandwidth issues, call packages offered, etc.
- Measure satisfaction by using the appropriate scale for each parameter.
- Make inferences from data by studying all aspects and related context.
3. Share your business values
All established brands have a set of values for which they stand and their clients typically identify strongly with them. While developing your brand, work to establish unique values rather than copy from other companies. Your brand has to work itself into the hearts and minds (especially hearts) of prospects and customers and you can’t do this by being like everyone else in the segment. Companies like Google, Apple, Coca Cola and Walt Disney are distinct and a customer who buys Microsoft is very different from a Mac fan. Know your potential customers priorities and communicate values that match.
4. Reach out to customers regularly
As explained by Kelly in her earlier post, “today’s email is different than the blanket campaigns of the past. It’s precision marketing, not blasting. It’s a campaign to market products or to market your customers’ products. It’s email marketing.” Once, you understand what is important for a particular set of customers; tweak your messages and campaigns. Provide them information that will empower them to live their lives and conduct business in a better way. Blogging is another powerful tool that lets you share your knowledge and passion, leading to two-way communications. Social media spreads the word about your brand and gives your customers an opportunity to share opinions and give feedback.
5. Think and act beyond actual sales
In order to make a relationship last beyond the immediate sale, think beyond it! Instead of concentrating on one transaction, try to know each person or company better. Dig deeper to know learn their processes and systems, their pain points and ways to help them. In a consultative style of selling, you should offer advice, let them know about complementary products and provide tips for maximizing the value of their purchases. Your clients can benefit from your products but they should also be able to leverage the relationship with you. Once there is trust in you, they will ask for help openly; resulting in long and fruitful relationships.
6. Provide value with automation
Automation converts time-consuming tasks into standardized processes which greatly improve efficiency. Businesses who automate are able to distinguish themselves from competitors. One example from our company is the Affinity Express Service Bureau 4.0 (AESB 4.0), an innovative, cloud-based workflow solution that enables publishers to evolve into complete marketing resources for their advertisers, while increasing profits, lowering costs and improving productivity. Some of the advantages of AESB 4.0 are as follows:
- Supports a complete range of digital and print products
- Increases the profitability of orders by making the process faster and easier
- Provides extensive business intelligence on an enterprise level
- Integrates the entire process from sales to billing
- Allows salespeople to access from anywhere and using any device
- Stores past campaigns, proposals, contracts and other details
As we have seen with AESB 4.0, automating and standardizing processes increases customer loyalty and pays off with improved customer retention rates.
7. Get Personal
If a restaurant manager remembers me from my last visit and suggests a new dish or drink that is close to what I preferred on my previous visit, I feel valued enough to visit again and share the incident with my friends. Customers like attention without someone getting in their way. Small tokens of appreciation like emails with customized offers, thank-you notes to returning guests and personalized greetings on special occasions are good practices. Involving your business in community events is a special way to give back to your patrons and customers. These small but very critical steps can become deciding factors when you are compared to competitors. Are you paying attention to what’s important to your customers? What else have you done to improve retention rates and build loyalty?