Most business owners know the cost of acquiring a new customer is much higher than retaining a current one. But just in case you need some convincing, here are a few statistics from Leading on the Edge of Chaos by Emmett C. Murphy and Mark A. Murphy.
1. Acquiring new customers can cost five times more than satisfying and retaining current customers.
2. A 2% increase in customer retention has the same effect on profits as cutting costs by 10%.
3. The average company loses 10% of its customers each year.
4. A 5% reduction in customer defection rate can increase profits by 25-125%, depending on the industry.
5. The customer profitability rate tends to increase over the life of a retained customer.
Those numbers are pretty astonishing and they point out just how critical it is to spend time improving your customer retention process.
Happy customers are active customers
A few years ago companies employed tactics such as newsletters, birthday cards, and exclusive promotions to nurture relationships with existing clients. These tactics are still valid, but it is critical to think beyond them. The adoption of social sites such as Foursquare, Yelp, Citysearch, Twitter, Facebook, LinkedIn and blogs is growing at a rapid rate and every business should understand how to include these new tools for their customer retention arsenal.
Social media is changing how companies think about customer retention
Instead of thinking of a returning customer as an additional sale, think of them as having the ability to publicize your products and services to thousands of people. Your customers will broadcast their thoughts about your company by blogging, sharing, tweeting, reviewing and following using all the social media channels available to them. If properly managed, this can be very valuable for your company.
Here are three tips for your new customer retention program:
You need to listen to what your customers want and need. Do research to find out where your customers spend their time online. Find websites, blogs, forums and social networking sites where your customers, and potential customers, exchange ideas, share pains, have fun, etc. You will learn a great deal about your company, and your competitors, by listening to what they are saying.
Another great way to list is to monitor the web for mentions of your company, your products, your services, as well as those products and services your target market may be using. Social Media Monitoring is the key to putting on your “listening ears” and hearing what’s going on. While there are several ways of monitoring conversations happening on Social Media, the best aren’t free. The way to choose which one is right for your business is to determine what information you want to see, what the best way for you to see it is (e.g., graph or list), and to give it a try. Conversely, you can always partner with experts in Social Media and lean on them to provide the information you need in an easy-to-digest format.
Now that you know where your customers are spending their time online, you can, and should, begin interacting with them. If you see that someone is mentioning your product or service in a positive light, respond by thanking them and letting them know you are there for them. Even more importantly, if you see that someone is expressing views that are not-so-positive, acknowledge and address their concerns. This will show readers that you are serious about providing good customer service and while the conversation may have originated with a complaint, you may have just generated new sales.
Be proactive online and engage your customer by providing educational content about your products or services and other material that will benefit them. Now that you’ve spent some time learning about their wants and needs you can create blog posts, articles and post on social media channels information that will solve their problems. They will soon see you as a trusted source and will be even more likely to return to your company.
Active customers are happy customers. And happy customers will return, tell their friends, and promote your business. You can actually think of them as an extension of your marketing program. So take the time to refine your customer retention process and you will be rewarded with an increase in your bottom line.