Thinking Strategically about Customer Retention

Since customers are your firm's most valuable asset, retention should be at the forefront of your business objectives. Most companies know that it is far less expensive to cultivate existing customers than to seek new ones, but few factor this reality into their approach. The following five strategies can help your company serve customers effectively and profitably.

Become a data-driven company

Data-driven companies are best prepared to capture customer insights and develop effective customer acquisition and retention programs. By collecting sales, market, competitor and customer satisfaction data, you have the means to differentiate and deliver value. Industry leaders use sophisticated analysis tools to tailor offerings, optimize prices, segment customers and market effectively. In today’s competitive market, companies that don’t leverage customer data are being left behind. 

Focus on your most profitable customers

Let’s face it, not all customers are equal. You only want to invest in your profitable or high potential customers so understanding profitability is critical. Quantify your acquisition and servicing costs and subtract from average customer revenue. Depending on your level of sophistication, you can even deduct other operating costs such as depreciation and plant costs for example. If your company captures data at the individual customer level, you can get very good at looking for customer opportunities that have the greatest impact on your bottom line.

Segment your customers to deliver the right product and message

Not all customers have the same needs nor can they be reached in the same way. They can differ by industry, company size or service expectations for example. Your ultimate goal is to develop differentiated clusters of customers for whom you can tailor products and fine-tune your sales and marketing approach. Although not all companies have the data and tools to segment in a sophisticated manner, it is always possible to segment on less complex variables such as location and distribution channel. Ultimately your goal is to align your value proposition and message with your customers’ needs.

Cultivate a service-driven mentality

Customer service is one of the most important competitive differentiators. A healthy obsession with the customer goes a long way. Employees should be trained in the culture and empowered to find ways to please the customer, even if it means breaking the rules once in a while. Customer service can also be enhanced by moving from a traditional sales and service role to that of business consultant. With a consultant mentality, you should be looking for ways to improve your customers’ success so you can prove yourself indispensable.

Conduct customer research with regularity

World class organizations leave nothing to chance when it comes to customer satisfaction. Research can help you get early notice of "at risk" customers and address their needs before it's too late. Customer loyalty solutions can be fueled by feedback from customers so it’s important to engage in a dialog on a regular basis. Customer satisfaction studies and exit surveys can be particularly helpful in aligning your products, people and processes with what matters most to your customers.

A retention mindset must permeate the culture of all companies in today’s economy. As technology changes accelerate, low price competition abounds, and sales channels shift daily, loyal customers are in short supply. The company that invests in customer research and makes a commitment to customer loyalty gains an important competitive advantage.