Implementing Customer Retention Strategies on the Frontlines
Organizations should always be focusing on customer retention, because it is the fastest way to accelerate growth. Your existing customers already know your organization and what you offer; so it is easy to offer them new products and services as well as help them become ambassadors to help you attract new customers. But how much effort are you putting into retaining customers you do not want? My guess is, too much.
This phenomenon is not just about not letting these customers go, which is passive. I could live with that. The issue is that you are actively trying to retain these customers. This means you are taking time and effort away from retaining the customers you do want.
Maximizing overall customer retention is not always good. Not all customers are good customers, and not all business is good business, as we have already established. Customer retention is only effective if you are retaining the customers you want. I call this concept purposeful customer retention reduction. Yes, I know that is a bit of a mouthful to say, but the concept should be easy to remember. Purposeful customer retention reduction is the act of not retaining certain customers, because they are not your ideal customers. You consciously decide not to retain them because they take time and resources away from your ideal customers. So, you let them go. Yes, that is right, you let them go (this should not be a new concept for you if you read Chapter 6).
Review Figure 7.1 and ask yourself in which quadrant your organization fits (be honest).
Figure 7.1 Purposeful customer retention reduction
If your retention efforts are inadvertent and helping to retain customers who are not ideal, then you are declining. You are keeping the customers you do not want and losing the ones you do want.
If your retention efforts are deliberate but targeted at the wrong customers, you are wasting time (bottom right). You are utilizing resources in the wrong places. You are putting resources into retaining customers you do not want, while the ones you do want are walking down the street right in front of you (figuratively speaking). More than two-thirds of the companies I encounter fall into this quadrant.
If your retention efforts are inadvertent and you are retaining some of your ideal customers, you are losing opportunity (top left). There are still many of your ideal customers who could be more effectively retained with targeted retention efforts.
Finally, if you have deliberate retention efforts focused on your ideal customers, you are thriving (top right). This means you know who your ideal customers are and you are taking specific steps to retain them.
I recently worked with a client who was not practicing purposeful customer retention reduction. The main reason was they did not know who their ideal customer was. They were trying to retain everybody, regardless of whether or not they were the right customer. As a result, their customer base was declining at about 5 percent annually.
Once we clearly identified who their ideal customers were, based on specific segments of the population, they were able to implement specific strategies to retain those customers and even attract new ones. Within a year, the customer base had stopped declining and even grew for the first time in 5 years.
If you assessed yourself in the top right quadrant, congratulations! You have the hardest job of all because you need to stay there. You need to remain focused on your ideal customer and implement specific strategies to attract and retain them.
If you are anywhere other than the top right quadrant, have no fear, you can get there quickly by answering the following questions:
1. What value do we offer to the marketplace? What are our competitive advantages and strengths?
2. Who are our ideal customers? Who would most benefit from what we offer?
3. What deliberate strategies do we need to employ to attract and retain them?
Take a few minutes now to think about those questions, especially the first one.
Until you know exactly whom you are trying to target, you will be wasting effort on those you are not trying to target.
To what extent are you inadvertently losing important customers while retaining unimportant ones?
In order to maximize retention efforts, it is important to know what factors have the greatest influence. The following 10 factors must be built into any growth and retention strategy:
1. Consistency—offering customers the same experience regardless of with whom they speak or where they are
2. Loyalty—creating an emotional connection to your organization and its products and services
3. Innovation—constantly bringing new offerings and ideas to customers
4. Value—offering products and services that meet a customer need, whether real or perceived
5. Quality—offering products and services that meet the quality expectations of your customers
6. Convenience—being easily accessible
7. Prestige—customers feel good about being associated with your organization
8. Service—resolving customer issues quickly and effectively
9. Habit—customers buy from you because it has become a part of their regular routine
10. Benefit—offering real or perceived benefit to customers
How many of these 10 factors are you doing effectively?
Bonus point: Customer satisfaction and service scores are outdated. All they tell you is that you are meeting customer expectations. You cannot build a retention strategy around that. Who cares if customers are satisfied if they do not keep buying from you? What does it matter that the staff is nice if people who browse do not become customers?
One of the key metrics Sleep Country Canada uses to measure customer satisfaction is the conversion rate of shopper to buyer. This is the percentage of people who enter the store and actually buy something.
That is a much better indicator than satisfaction scores and positive feedback.
American Airlines and Customer Disservice
I want to recount for you a recent experience I had with American Airlines, not to pick on AA, but to use it as a case study for what many of you are doing to your customers.
I called American Airlines reservations to book a flight to see a client in Philadelphia. Almost one and a half hours and three ticket agents later, I finally had my ticket booked. The following are some of the particulars with some general questions for you to consider:
The agent I spoke with was in a call centre with other agents, and the background noise was so loud, it sounded like she was in a noisy restaurant. I had to keep yelling my credit card information into the phone.
• Are your employees taking customer calls in a place where they can best focus on the customer?
The travel voucher I was using to book the flight was issued in Canadian dollars, but the AA reservation system only accepts US dollars. It took 20 minutes and three people to figure out how to apply the voucher. Not to mention that it was a paper voucher and needed to be mailed in order to be applied.
• Is your technology or your internal processes limiting your ability to resolve customer issues quickly and effectively?
After all this was completed, I contacted the executive responsible for the customer experience at AA (whose title was SVP of the Customer Experience). I received a voice mail from the Customer Relations department on behalf of this executive, who proceeded to tell me they have no incoming phone lines, so I cannot call them back.
• Are you providing customers an easy way to get in touch with you?
What American Airlines forgot is that every customer complaint is an opportunity to connect with customers. It is an opportunity to help those customers become more loyal. Or even become evangelists for the brand. Had AA handled this properly, I could have become a more loyal customer. Instead, I will avoid using AA at all costs.
Are you providing customer service or doing your customers a disservice?