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The Secret to Improving Customer Retention

If you ask a room full of executives what the secret is to improving customer retention and loyalty is, you will probably get a mix of answers. But, place executives from large, successful companies in a room and ask them the same question, and you’ll start to hear answers that revolve around investing in employees and in the customer experience. CustomerThink recently posted an article on improving customer retention and loyalty in the summarized article below:

Improve retention and loyalty by keeping enough of the right customers. This means you need to understand two things:

  1. Be keenly focused on the right customer
  2. Provide value to them, efficiently

Let’s explore why retention and loyalty are important, what poor retention and loyalty looks like within an organization, and when you’ve finished reading, you’ll have a more effective way to identify and fix your retention and loyalty problems with a sense of urgency.

Why It’s Important

The universe of customers is not infinite – especially in B2B organizations. Most organizations have a finite pool of potential customers, where losing a customer means your target audience shrinks just a little bit. When compounded over time, you could lose your entire target audience or significantly damage any financial performance goals. Customer retention and loyalty are important because they make achieving growth and financial performance goals easier.

You May Have A Customer Retention Problem If:

  • Your net growth in customers is low. If customers are leaving as quickly as you are acquiring them, you’re only getting a portion of their lifetime value. Let’s say your customers are growing annually by 10%, however only 3% of them are still there after 12 months (which is less than your average lifetime value). If these numbers sound familiar, you’re experiencing a retention and loyalty problem.
  • Your marketing and sales costs have increased every year recently, or they’re simply too high. It’s typically cheaper (and easier) to keep a customer than it is to find a new one. As your churn rate increases, so do your marketing costs to replace the customers you’ve lost. You may be spending more to keep customers from defecting. In other words, marketing and sales become a “tax” for your inability to provide value.

Improving Retention and Loyalty

You need to pinpoint the ideal customer within your target market. Our experience has shown us that most know their target market, many can pick out their ideal customer within that target market. But few are focusing their daily decisions across the company solely on that ideal customer.

Start to focus your marketing, product and service design, and fulfillment efforts solely on the specific, ideal customer. By designing and executing your business for those who are most likely to drive your growth and profitability, you will be most attractive choice for them. And you’ll capture those who aspire to be like your target customers or are most like them. Those who are most different from your target customers will self-select away from your organization.

This can be difficult for some leaders to swallow, because focusing on target customers can seem as if you’re leaving money on the table. “Everyone is a good customer, I don’t want to lose the opportunity to serve any of them.”

But the truth is, investing time and money on non-ideal customers within your target market can actually cost you money. Why? Because a non-target customer is more likely to consume resources at the customer service and managerial levels, which is to the detriment of loyalty, retention rates and more. Actually, we call these “profit leaks”, and stopping those leaks is a path to profitability.

Look for moments in the customer experience that carry disproportionate weight in influencing your customer’s perception of success for the overall experience. We call them Tipping Points. There are a handful of these moments in any customer experience. Where are they in yours? Your customers’ perceptions during these Tipping Points can dictate their overall experience.

Tipping Point moments are significant for three reasons:

  1. They can move the customer fastest and furthest towards having their need solved.
  2. They create a high level of emotional engagement with the customer.
  3. The disproportionately positive or negative perceptions that occur at a Tipping Point moment create a positive or negative halo effect on a customer’s perception of the entire experience. Brilliant companies know where their Tipping Points are and are intentional in how they design these moments accordingly.

In conclusion, the secret sauce for improving customer retention and loyalty involves knowing who your most profitable customers are and paying attention to the moments in the customer’s experience that have the biggest impact. Know and do these things well, and you’ll be rewarded by customers that happily and continuously rely your brand to fulfill their needs.


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