Why to move from customer acquisition to customer retention?

Lars van Wieren Lars van Wieren


Customer satisfaction survey

We’re already halfway through the crash course towards the super promoter. Today we ask ourselves the question why and how to build long-term loyal client relationships.

Strong focus on luring in new clients

Previous post we ended with the question why businesses tend to predominantly focus on baiting new clients, but lose track of their existing clients. Let me tell you something: It is stupid to reward and punish employees based on the number of clients they lure into the company. If at the same time the business is leaking existing clients, you?ll be carrying coals to Newcastle. Instead you should be dividing your sales force into two groups: the savvy salesperson that secures new deals, versus the more nourishing type that knows how to build sustaining meaningful client relationships. Reward the first group for every client they bring in, and reward the second group for every contract renewal.

The Loyalty Effect

In fact, client retention brings in a lot of money! In his bestseller *The Loyalty Effect *Frederick Reichheld elaborately demonstrates that when a company manages to retain 5% more of their clients, profitability can increase with 25 to 95 percent depending on the branch. Thus in general more client retention leads to higher profits. At this moment however most businesses still reserve the main share (60 to 80 percent) of their marketing budget to attracting new clients, leaving very little to keeping the existing ones. This leaves you pondering: Why should a subscriber that has been loyal for over 10 years be paying more for his or her phone than a new subscriber? What effect one might ask, does this kind of dynamic have on client satisfaction and loyalty?

Let me spell out for you some of the beneficial side effects of building long-term client relationships. The longer the relationship:

  • The more you will learn from one another

  • The more you understand each other?s procedures (time-efficient)

  • The less problems or complaints occur

  • The lower the costs of support, correction of errors, complaint handling

It’s difficult right?

I must note that long-term contracts are becoming an increasingly rare commodity these days. This means you?ll have to prove yourself to your clients time and again. Babe Ruth once said “Yesterdays homeruns don’t win today games”. And it’s true: Clients have become more critical, and have as a result taken the liberty to frequently switch suppliers, to great frustration of companies. After all, the growing competitiveness has made client loyalty more important than ever before. So what is going wrong? There is:

  1. No reason to stay. 60% of customers that indicate to be satisfied leave anyway. They?re not necessarily unhappy but they see no acute reason either to stay.

  2. No hassle to change supplies. The advance of the digital world has brought about much more transparency than before. When it’s easy for clients to switch suppliers they can be gone in the blink of an eye.

  3. No unique deal. When a product or service is not distinct enough, people go for the lowest price out there.

  4. No innovation. Stagnation is deterioration. Ask Nokia, Saab and Kodak.

  5. No client oriented organization. Many companies still remain organized around the company’s product and function, rather than directing their organization to processes and their clients

  6. No client loyalty strategy. Ask yourself how you’re making your clients feel extra special right now.

How to take the bull by the horns

Now I can hear you thinking: Okay I get it, but how should I go about this concretely! You won’t create client loyalty by merely throwing around some smart marketing tricks or ad hoc price bargains. What it takes for your company is a long-term strategy that trickles down the organization and becomes part of it members’ dna. After all, as Simon Sinek once declared in his bestseller* The Golden Circle: “People don’t buy *what you do, but why you do it.”

In order to give you a head start on this ambitious glooming endeavor, I would like to finish this post with what are called The Building Blocks of Client Loyalty. In short, these include:

  1. An inspiring vision and mission (meaningful marketing)

  2. A client oriented organization structure, constituting entrepreneurial teams and empowered employees.

  3. Optimal client support, including strategies such as omni-channel, customer journey, and customer experience.

  4. Client involvement, through partnership marketing, co-creation, and/or crowdsourcing communities.

  5. Differentiated offers with added value for the client

  6. A loyalty strategy, with a personalized treatment specifically tailored to the client in question

  7. Strong engagement from top management, through direction, facilitation and exemplary behavior.

Remember: You can shear a sheep many times, but you can skin it only once.

I’m very curious to learn what you do to retain your company’s existing clients.

Let me know below!

Lars van Wieren, founder Starred.com

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