Make Your Customer Investments Pay Off
Your customers are your source of revenue, so it makes sense to invest money into them. But before you put a plan in place to attract, convert and retain customers, here are a few things you should consider to make your customer investments payoff.
#1 – Look Beyond Satisfaction
Customer satisfaction is certainly an indicator of customer repurchase intentions. Improvements can reduce churn and create new business through referrals. So, it makes sense that businesses invest in this area. But even satisfied customers are not created equal as it relates to profitability. Understand why customers are satisfied. Some factors that impact both satisfaction and profitability include brands, products/services, buying experience, differentiation – and of course, price.
Satisfaction and profitability are not mutually exclusive. If a customer is only satisfied when you give them special deals, do you want them? What about those who pay full price but demand so much that they offset the revenue they provide? Some customers simply can’t be profitably satisfied. So why make the investment in them? Invest resources in your profitable customers.
#2 – Focus on the Lifetime Value of the Customer
How much you invest to acquire a new customer or retain them will vary. But you need to think beyond the most recent or first transaction. Consider instead what you expect to earn from customers on an ongoing basis.
This long-term view considers what products or services they buy, how often and for how long. Seek to understand your customers’ value. When you do, you can look for ways to improve it and decide how much you will spend to acquire and retain customers.
Related: What Are Your Customers Worth
#3 – Budget and Plan for Retention Too
Marketing costs are typically focused on new business generation efforts. While important, a portion of your marketing budget should be allocated toward nurturing and retaining customers. When you consider lifetime value, it’s a good decision. Bonus: It’s a lot cheaper to retain a customer than to acquire a new one!
Imagine if you took 10% of your marketing budget and used it for engagement and retention? Depending on your industry, these areas come to mind: service, support, and account management. But extra touches and thoughtful gestures are equally important.
How are you going to keep your customers engaged? This is where the plan comes in. Create a variety of retention strategies or tactics to implement throughout the year. How often you do it will likely depend on your industry and clients. Get creative. Stand out. Here are a few ideas to get you thinking….
- Pick up the phone and check in with a customer. Lunch, golf or coffee optional.
- Create a blog to educate and empower customers.
- Remember special occasions with birthday or holiday cards. It’s the thought that counts.
- Turn fast service into quality and complete service. Customers will view you as courteous and helpful.
- Email special offers just for customers. It’s not special if everyone gets it!
- Surprise them! Little, kind gestures make an impact. A client left a Hershey kiss with their invoice. Low cost, but memorable.
- Send postcards for reminders. With so much emphasis on email and text, snail mail gets noticed.
- Say thank you with a personal, handwritten note.
- Build a social community online. Choose the platform that is best for your business and customers.
- Use white papers and eBook guides to demonstrate expertise. Be a resource for your customers.
Remember, nothing happens until you take action. So, decide what you will do and how often you will do it. Then, schedule it so it gets done!
#4 – Track Retention Rate Over Time
What we measure we can celebrate or improve! Do you want to know if your customer investments are paying off? Your customer retention rate, over time, will tell you that.
You can calculate the retention rate for any period you choose: weekly, monthly, quarterly or something else that is relevant to you. Pay attention to the trends over time! To calculate, you need to know the following:
Retention Rate Formula: ((CE-CN)/CS)) X 100
- CS – number of customers at the start of period
- CN – number of new customers during the period
- CE – number of customers at the end of period
Let’s do the math with a simple example.
You started the first quarter (January 1) with 200 customers [CS]
You ended the first quarter (March 31) with 250 customers [CE]
During the first quarter (Jan 1 – Mar 31) you acquired 65 new customers [CN]
Let’s plug them into the formula: ((CE-CN)/CS)) X 100
250 – 65 = 185; 185/200 = .925; .925 x 100 = 92.5
Your retention rate for the period is 92.5%
#5 – Monitor Satisfaction
If you spend money to acquire and keep customers, it makes sense to get feedback and monitor customer satisfaction. Surveys allow you to do this. When done right, they help you quantify the quality in your business – and support your investments.
When done by phone, they allow you to stay in contact with customers, identify and fix mistakes, identify possible problems (before they become major issues) and request testimonials, reviews, and referrals. Remember to apply item #1 above when you consider changes or improvements in your business – rely on feedback from ideal, profitable customers!
Customer acquisition and retention are important for any business. Planning how you will do both will save you time and money. Incorporating the five items above will help you make better decisions.
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