I am willing to bet that the question, “how can we find ways to grow?” is echoed through the halls of corporations and membership organizations over 10x more than a call for ideas to keep current customers.
One may be surprised by the impact that losing a customer can have on a business’s performance. Not only do the strategy, marketing, and sales hours it took to get that customer to give you their money go down the drain, but there are many other long term consequences of weak customer retention.
This makes customer retention job #1 at any organization. Companies and associations must strive to meet and exceed the expectations of both individuals or business customers. It doesn’t generally require large overalls or massive expenditures to engage and retain these customers, but holding onto customers or members is vital towards the stability of any membership organization and corporation. As the statistics below show, going after new customers is much more expensive than investing in holding onto current clients.
4 Important Reasons that Marketing and Customer Care Execs Must Focus On Customer Retention
Reason #1) It costs organizations 5 to 8 times as much to acquire a new customer as it does to retain a current customer.
The revenue that come in from customers is a result of an organization’s business development investment. Most often this takes the form of outgoing cash flow focused on sales and marketing. The payday on the investment is only recognized if the customer remains a customer. Sometimes, it can take over a year to reach a break even point.
This means that holding onto every customer or member is vital for the longevity of any company. The cost savings resulting from holding onto customers, rather than having to increase your investment in attracting new customers, affords an organization additional funds to invest elsewhere. (Stat source: Lee Resources, Inc.)
Reason #2) A 2% increase in customer retention is the same as cutting expenses of the organization by 10%.
Profitability and sustainability are top-of-mind for most executive teams. Why not boost profitability in a way that won’t kill morale and productivity? Businesses and member organizations can use the extra cash flow from their customer retention strategy to invest in new customer acquisition, expand into new markets, or upgrade current customer engagement systems to further improve the relationship between the company and its customers. (Stat source: Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy)
Reason #3) 73% of customers leave a company because they are not happy with the customer serviced provided.
With the advent of simple social networks, real time support, and easily researchable alternatives, customers’ customer service expectations of companies have spiked over the last decade.Companies and membership organizations are turning to online tools to keep customers engaged so they can catch at risk customers sooner and provide a much higher ratio of positive customer experiences to cushion the blow of the occasional frustration that all customers face.
Along with building stronger, more collaborative relationships with customers or members, many organizations are also utilizng social business tools to encourage peer-to-peer support in order to control customer service costs and focus their effort of higher-priority customers. (State source: Harris Interactive)
Reason #4) 91% of customers don’t ever return to a company after leaving.
Compound all of the stats above and the fact is, once you lose a customer, they will most likely never do business with you again. This is why maintaining a high level of customer engagement and satisfaction is paramount to the wellbeing of any business or membership organization. (Stat source: Lee Resources, Inc.)
BONUS FACT: In some industries, as a customer or member stays with a given organization, the value of the customer actually increases.
The longer a customer stays with your company, the more likely they are to invest additional time and money with your organization. Customers or members who are just starting off with your company or association are generally more timid. They often only spend the minimum in order to check out the organization and see if it is worthwhile. This makes both engaging new customers and retaining long time customers extremely valuable and must be a top priority for any company and association.
Online Community Takeaway
Online communities and private social networks provide companies and associations with a platform to keep customers or members engaged. Some companies (usually B2C) are comfortable using public social networks as the center of the customer retention efforts, while other organizations choose to launch private online customer communities.
The flexibility of online customer community software allows organizations to reach diverse customer segments and shape their engagement strategy around the social tools and information that are relevant to each customer.
Customer retention relies on your customers finding success with your products and services. From peer-to-peer discussion groups to searchable file libraries to proactive customer service tools, there is no other format that can have a greater impact of your customers finding the answers, people, and advice they need to get results.