Cheaper to keep a customer?


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Not necessarily.

As part of our weekly #custserv Twitter chat last night (if you haven’t checked it out, and you’re itching for some great idea exchange on the topic, tune in to that hashtag Tuesday nights at 9pm ET), Marsha Collier, one of the hosts of the chat, pondered why companies continue to apparently spend more time, energy and money acquiring new customers versus retaining existing customers.

Well, it’s because giving profitable customers a reason to continue doing business with you is really hard work.  And when we don’t do those difficult things well; like delivering a superior experience, listening to our customers, committing to action and exceeding expectations, we are marginalized in our customers’ minds and the next transaction, if we’re even given the opportunity, boils down to a discussion about price.  And, with the knowledge your customer has gained about you, with the negotiating ammo you’ve provided him by not focusing on customer service, keeping that customer’s business is going to cost you, dearly.   

Take the following scenario:

You go to a trade show.  You find out one of your competitor’s best customers is looking for a new supplier.  You meet. You dazzle him with the “grass is greener” pitch at a time when he still can’t see the man behind the curtain (the dysfunction of your customer service).  You negotiate a decent deal.

Fast forward, to contract renewal time.  You’ve missed SLA’s.  Your technical support group has experienced a lot of turnover.  Your customer has had to escalate many issues that should have been handled by front line customer service reps.  Your invoicing is incorrect more often than it is correct.  Then, you sit down to ask for that customer’s continued business.  What do you think its going to take to keep that business?  Among other things, if you’re even given the chance, is a price point a LOT lower than was in the original agreement and other concessions that will erode those margins your customer granted you in the first place.

Meanwhile, during the term of that contract, you’re hottest sales people have been out there winning new customers, churning and burning, moving inventory and takin’ names.  You’ve rewarded those sales people for winning “new logos”.   And, within your sales and support organizations, you’ve handed over the management of your existing customers to your most junior account managers.

So, while conventional wisdom tells us, if done correctly, its ‘cheaper’ to keep a good profitable customer than go out and continually find new ones, its not easier.

Republished with author's permission from original post.

Barry Dalton
Telerx Marketing
Consumed by the pursuit of delightful service. Into all things customer loyalty and technology. My current mission is developing new service channels and the vision of the contact center of the future.


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