I talk often about customer experience, but recently I’ve heard from some followers that they’d like a bit more on customer retention. The first thing to understand about customer retention is that obviously it comes straight from customer experience. In short, if the customer experience is good, the customer retention is there. Also there: referral. These are paths to growth in most industries.
Before we dive a bit deeper on customer retention, let me give you a couple of ‘quick hits’ if you’re a busy person who can’t find the time to read the whole post:
- On virtually every episode of my podcast so far (10 to this point), we talk about customer retention — and that’s across different industries
- Stop worrying so much about customer acquisition and focus more on customer retention
- Strategy: The recovery call
- Five steps for regaining customer trust
- Customer retention strategy: Learn to say ‘I’m sorry’
Alright. Now let’s dive a bit deeper.
Customer retention and sales compensation
This is a big issue and sometimes gets glossed over in organizations. Companies often have very strong reward metrics around immediate, short-term goals. In many places I’ve worked with, the sales team — which is often a ‘power core’ of the organization — gets rewarded more heavily for bringing in a new client or lead than for helping to retain/nurture the relationship with an existing client. In a set-up like that, you are prizing customer acquisition, because the acquisition process will be where the sales team can make their perks and rewards.
When that happens, customer retention is seen as less important. You can create a situation where you’re always in a constant chase for the next new client, as opposed to further developing the relationships you already have. I’m not knocking new clients. New clients are great! But you also need to think about customer retention.
Customer retention and the Minneapolis story
I had a friend in financial services in Minneapolis years ago. He was the second-highest earner at his firm and was building a great life for his family. All his colleagues had no idea how he did it, because he only had between 2-3 clients at any given time. He was never out beating the bushes looking for new leads/prospects. Some of his co-workers would get 18-20 new clients in a year — and they were still making less than him. One asked my friend how he did it, and my friend said, “It’s all about customer retention. You build loyalty with a client and they’ll add service after service. You can do great off just a few.” Most people don’t ‘get’ this, but in many industries, this model can work.
Customer retention and the five competencies
The five customer experience competencies are core approaches to CCO-level work that I’ve developed over three decades. If you follow the five competencies, customer retention can and will result. There are actually also customer experience competency ‘recipe cards’ that you can use to quickly create ROI for your organization. Here’s a primer on how to do just that.
Customer retention strategiesThis is a good round-up of some strategies for customer retention. The Harvard quote at the top is powerful, too: if you increase customer retention by 5 percent, the profit increase can be anywhere from 25-95 percent. Who wouldn’t want those numbers? I’m not a huge fan of companies focusing on short-term results — customer retention doesn’t happen in the short-term — but I am a big fan of companies doing 95% profit growth, and customer retention is a great way to get there. Here are an additional 20 strategies. If you look at the two lists and see the pockets of overlap, much of it comes down to effective communication. That’s both internal (employees) and external (customers). When you reduce friction and pain points around communication, customer retention can follow.
What other customer retention strategies or ideas have you seen, or would you recommend?