By John Garvey
There are several reasons you should prioritize retention over new customer acquisition. Harvard Business Review reports that “acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one,” citing research from Bain & Company. The same, oft-cited research suggests that improving customer retention by five percent results in a 25 to 95 percent increase in profits.
Focusing first on your existing customers, assuming they’re profitable, is less work and often makes customer acquisition easier to boot. If you retain customers and create exceptional experiences for them, they’ll also become your best advocates.
- Time-limited offers. Harvard professor, best-selling author and persuasion expert Robert Cialdini named scarcity as one of his 6 Principles of Influence. In a business setting, one way of harnessing this is time-limited offers. Prospects are more likely to act on an email marketing offer, for instance, when it’s time-limited.
“When our freedom to have something is limited, the item becomes less available, and we experience an increased desire for it,” states Cialdini in the modern classic Influence: The Psychology of Persuasion. “However, we rarely recognize that psychological reactance has caused us to want the item more; all we know is that we want it. Still, we need to make sense of our desire for the item, so we begin to assign it positive qualities to justify the desire.”
- Customer surveys. As we’ve noted before, for every customer who complains directly, there are about two dozen customers who are quietly dissatisfied with some aspect of your service. In addition to identifying areas for improvement, surveys can generate testimonials and keep customers engaged.
Customer surveys are often focused on identifying problem areas. While that’s important if you value repeat business, a Harvard Business Review article, The Power of Positive Surveying, suggests that a more positive slant can improve customer satisfaction and retention.
“Beginning a survey with what the researchers call ‘open-ended positive solicitations’ seems to be an easy, low-cost way to increase satisfaction and spending.”
By getting customers to recall and relate positive experiences, you increase their sense of well-being and make them more likely to return. While customers should have an outlet to vent (ideally not Yelp!), surveys that focus too much on uncovering problem areas can backfire.
“Companies should look at the customer feedback process not only as a chance to listen but also as an opportunity to subtly influence customer perceptions.”
- Ambience. Every introvert has walked out of a cafe, restaurant or store because of excessively loud or grating music, too much ambient noise or overcaffeinated staff. A lot of retail settings are geared toward extroverts because of the perception of the giddy shopaholic, but a third to a half of us are introverts. The reverse can also be true, of course. Lighting and music geared towards one kind of customer risks driving off another, potentially larger group of customers.
Music should also be attuned to your customers. This may seem like common sense, but individual employees may enjoy country music or electronica, which people tend to either love or hate. It may seem like micromanaging to dictate which genres or stations employees can choose, but in many cases it’s good business sense.
Ambience was one of the keys to Starbucks’ success. When Howard Schultz took over the company, he was inspired by the Italian cafe scene. Much like the English pub, these were uplifting social spaces conducive to exchanging news and sharing ideas. Coffee stopped being a commodity and became more of an experience.
- Be ultra-responsive to online reviews … the good and the bad. We discussed this in our March blog, Best Practices for Dealing with Negative Customer Reviews. Responding to a positive shout out–even a trivial one–reaffirms that you value your customers. Not responding to a negative review–even if it’s petty–validates the complaint.
- Personalization. This begins with understanding your customer personas: their aspirations, their pains, preferred methods of communication and social media habits. Focus on the channels that matter most. If you have someone in charge of social media or email marketing, it may even be good to have that person sign off on messages using his or her first name (under the company label, of course). This can make you stand out regardless of what size your business is.
Telling customer stories is another great way to do this. While beyond the scope of this blog, there are a variety of great ways to do this including social media, case studies and video blogs.
One emotional and vivid customer story is far more persuasive than a data dump in 85 PowerPoint slides. – Carmine Gallo, The Storyteller’s Secret
- Email marketing (Yes, it still pays). Hubspot and Search Engine Journal state that email marketing has an average ROI of 4300% – but that’s obviously quality dependent. Email marketing keeps you top of mind and can help personalize your brand. A point of sale (POS) system with email marketing integrated can segment customers by purchasing history and preferences, allowing you to deliver relevant, individualized offers. Organized customer data is a prerequisite to effective marketing and systems like NCR Counterpoint, which we offer, make it easy.
Electronic receipts delivered by email, another feature built into our POS systems, also allow businesses to send customer feedback surveys and additional offers with ease.
- Rewards programs and exclusive offers. Again, the better your customer data is, the more you can tailor offers to entice customers. It’s a truism that loyalty programs make people feel valued, but also consider throwing out the occasional surprise reward. These can coincide with birthdays or be completely random.
Incidentally, this is another example of Cialdini’s scarcity principle at work. An offer available to few people will be perceived as having greater value than one available to the masses.
- Understand your mission and communicate it across channels. Know your “Why” and weave it into every aspect of your business. Use it to galvanize employees and communicate the value of what you do. This can be a social mission or it can simply be exceptional commitment to satisfying a market need. One of our partners in Fort Collins, Happy Lucky’s Teahouse, has a close affiliation with Sustainable Schools International, a nonprofit supporting education in Cambodia. A portion of every sale goes to SSI and customers have the option to “round up” their payment to the nearest dollar. This provides further financial support as well as generating awareness for their cause.
Have anything to add to the conversation? We’d love to hear from you!