Your best source for growth and stability is your existing customers. Never forget that, or you’ll be taking your first step toward being obsolete in your market.
In my consulting work I continue to see companies who establish “policy” that either takes for granted existing customers, or effectively treats them as second-class. Why else would a company exempt existing customers from taking advantage of new promotional deals? Why do some companies spend thousands of dollars to acquire a new customer, but will not take a proactive step to retain an existing patron?
ALL the research indicates that it is far more expensive to find and acquire a new customer than to keep and grow an existing one. Depending on your business, the cost difference could be anywhere from 5 to 20 TIMES higher. It doesn’t take a math genius to make the calculations. If you make policy changes that allow you to improve your customer retention rate by just 5%, (everything else being equal) you’d guarantee a 77% growth over the course of 10-years.
Notice the time horizon I mention. Ten years. Too many companies think only in terms of this month or this quarter. But the true secret to real success is establishing a long view for your business. This means that you must create policy that will allow you to retain customers year after year after year. Your company cannot afford to pay 5-20 TIMES more to replace customers who walk away. Keep in mind that you’re not the only game in town – all of your competitors will be happy to welcome the customers you let get away.
I had two experiences this month that serve to accentuate this point. The first experience was with a Fifth/Third Bank with whom I had done business for 22 years. When I turned to them for help with a problem, I was told they could not assist me. Not only did they refuse to help, but they also made the problem worse by providing me with faulty information five times. Three times they told me the problem was resolved when, in fact, it was not. In each case the Fifth/Third Bank employee hid behind “policy” as the reason she could not help me.
At the height of the frustration caused by this customer-unfriendly behavior at Fifth/Third Bank, I stopped into another local business (City Barbeque) and ordered a sandwich. I waited in line to receive the food I had ordered for longer than usual. I ended up having to remind an employee of my order before actually receiving it. It was slightly annoying, but no big deal. A few minutes later the manager of the business found me, apologized for my wait and compensated me generously for my “trouble.”
Ahh, the tale of two policies – it was the worst of times, it was the best of times. Which of these two businesses is likely to retain me as a customer?
There is another critical aspect to these transactions. People have networks of friends, family and colleagues. People talk. In our world of blogs, instant messaging, email and websites the stories of good policy and bad policy can be spread quickly far and wide. As someone with a wide professional network, I have already told hundreds of people the stories above. For City Barbeque, these stories will bolster their business and allow them to acquire new and enthusiastic customers. For Fifth/Third Bank, well, not so much. In fact, I'd recommend that you seek a new bank immediately. If you haven't been abused as a customer there yet, their policies assure that you soon will be.
I strongly encourage you to look at your company policies. Do they treat your existing customers with respect and value? Do you proactively make them aware of the new promotions and pricing you’re offering? Is “the customer is always right” just a platitude, or is it a means to building a sustainable business?
In the midst of this holiday season, be thankful for your existing customers without whom you would not be in business. Grant them the special gift of appreciation in some tangible way before this year ends. I promise that such a policy will yield long-term benefits.
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