If it is difficult to attract customers, it is more difficult to retain them. Most marketing theories and practices over time have relied on attracting new customers rather then retaining the old ones. A sustainable business however, concentrates on its new as well as old customers equally.
Traditionally, the emphasis has been more on new customers rather than customer retention. Customer retention needs more of building relationships and keeping after sales commitments intact. The better the after sales service, the better will be customer retention. Thus companies would be wise to perform customer satisfaction surveys regularly as customer satisfaction is the key to customer retention.
A highly satisfied customer stays longer with the company, buys and self promotes new products being launched by the company, is optimal for feedback on improving the organization and the cost of this customer is much less then attracting new customers.
Customer complaints is NOT a measure of customer satisfaction. 95% of people never complain to a company. They just move on to another brand. Thus using toll free numbers and suggestions forms has become a norm in major MNC’s as well as retail chains. Just so they can reach out to their customers, and possibly bring back lost customers (Refer – cost of lost customers)
Effect of complaint resolution on customer retention – If a customer complains, The rate at which complains are solved are also important for customer retention. Market research has concluded that after complaint resolution, 50% to 70% customers are retained. However, if the complaint is resolved within optimum time (mostly 24 hours), the rate of retention goes upto 95%. Furthermore, About 30% customers whose complaints were solved recommend the same company to an average of 5 people thereby increasing the word of mouth promotions.
Customer Retention programmes – Finding the patterns of customer defection is important to devise optimum customer retention programs. If you wanna retain lost customers, then first you need to find out WHY these customers are leaving your brand / product. This can be done by analyzing internal records, sales calls, pricing and product surveys and competition studies. For example – Each and every call in a customer service department is recorded so as to improve the quality of customer calls over time. Thus, some key questions to be asked are
- What is the rate of defection?
- Does retention vary by office, region, sales executives or distributor? (To find out why customer retention is higher in some places)
- Does your pricing have a relation to customers and if yes, what is the magnitude of the effect.
- Where do your lost customers usually go? Which brand / product and why?
- What are the retention figures for your sector / industry?
- Which company in your sector retains their customers the longest and why?
These are some questions which a company can ask of itself while devising a customer retention programme.
Interesting facts on customer retention
- Acquiring new customers comprises of five times the cost of retaining your customers.
- An average company loses 10% of its customers each year.
- Lessening the defection rate by as low as 5% can increase companies profits by 25% depending on industry standards.
- Customer profits keep on increasing over the life of the retained customer as cost in retaining the customer becomes lower and lower.
These facts in themselves explain the need of customer retention Why would you want to spend 5 times your hard earned profits if you can tweak your own organization and thereby retain customers.Some excellent examples over time have been Samsung, Ford, Hyundai, Nike, Aquafina, Apple, McDonalds, Pepsi, Starbucks, Estee lauder and Walmart.