How To Improve Customer Retention and Your Bottom Line

How To Improve Customer Retention and Your Bottom Line

We’ve all heard the old saying “a bird in the hand is worth two in the bush”, right? That adage applies directly to your business.

In a big way.

Today’s marketplace is so competitive that it’s critical you find ways to retain your customers. Why? Because there is so much noise out there that you could lose a customer in a click. So many buying opportunities, so many choices for solutions.

Customer retention is becoming more of a focus in the digital age – what with all the marketing channels, analytics options and automated systems. But keeping your customers is really dependent on a long-time business center that predates the Web: customer service.

Is your customer service effective?

Customer retention begins with superior customer service. After the sale, your CS agents are typically the first line of defense against customer drop-off.

Here are some data points that should open your eyes:

  1. 42% of customer service agents cite disconnected systems, archaic interfaces and multiple applications as reasons for their inability to efficiently resolve customer issues. (Forrester Research)
  2. 89% of consumers stopped doing business with a company due to poor customer service. (Harris Interactive)
  3. Customers are 4x more likely to buy from a competitor if they experience an issue that is service-related versus price or product-related. (Bain & Co.)

What’s more, consumers are twice as likely to share bad experiences with a company than share good experiences. It can cost big time if your customer service practices are poor.

While the sales team is a crucial component of customer acquisition, it is the customer service team that often impacts your ability to retain customers.

The cost of not improving customer retention can ruin your ability to become more profitable.

Hitting the bottom line

Sure, customer retention affects top line growth. If new buyers are joined by repeat buyers, your sales increase. But it’s how customer retention affects your bottom line that is more startling. It can cost 6-7 times more to attract and close a new customer than it does to achieve a repeat win. Those costs translate to your bottom line, chipping away at the per-unit profit built into your pricing.

Here’s how a lack of client retention can impact your bottom line.

Customer Retention Impact

Sales 2,000 3,000 4,000
Marketing Expenses 300 360 400
Sales Expenses 700 960 1120
Other Expenses 800 1200 1600
Net Income 200 480 880
% Net Profit 10% 16% 22%
% Retained 10 15 20

You can see that sales expenses and marketing expenses become a smaller cost centers relative to sales with higher retention rates.

Your marketing expenses are lower because the level of engagement is higher. You’re more likely to get response from happy customers, so the number of impressions is lower to acquire that engagement. Also, you’ll likely have to offer less to entice a purchase with an  existing customer than you would to convert a new customer. Lastly, your “win frame” (the period between first impression and the last touch point before a close) is shorter with customers who are familiar with your solutions. This reduces marketing and sales costs.

So, what can you do to improve your customer retention rates?  I’ve got a few thoughts.

Customer-centric organization is best

KISSmetrics has a great infographic on the fastest way to lose customers. It paints a picture of the costs and risks associated with not creating a customer-centric enterprise. If you want to improve customer retention rates, you’ve got to become a customer-centric enterprise.

How do you launch a customer-centric retention program? First, set goals relative to customer retention practices. What is your customer base? How many repeat customers are within your base? Establish benchmarks to evaluate how your program is working.

Set objectives for your retention program. What do you want to accomplish with each touch point? What KPIs will be used to determine success? Set clear objectives for customer satisfaction, customer rewards, employee training (see below), issue tracking, and other factors.

Look at the life cycle of your product or service. Are there opportunities to continue the relationship you have created during the first sale? I set a reminder notification for a time prior to the expiration of the product life cycle. I want to touch base to see if her experience with our product has been awesome, find out if there is a continuing need, and determine what I can do to support another buy.



Customer-centricity should be part of your loyalty programs, but not simply to grind multiple buys from the same customer. Loyalty should be rewarded with enhanced focus on customer service. It should extend beyond customer satisfaction to getting your customers to advocate for your brand.

I believe it all starts with a customer-relationship-building attitude.

Last year, econsultancy published their Cross-channel Marketing Report, which is a small but telling study of marketing efforts across the globe. I want to highlight an interesting nugget contained in the report.

  • When asked “Does your company carry out relationship marketing?”, response broke down like this:
  • 30% indicated “Yes, we are very committed to this”
  • 46% responded “Yes, to a certain extent”
  • 22% admitted “No, we don’t”

Okay, 30% are deploying relationship marketing. That’s good. But the next two responses are unbelievable!

“Yes, to a certain extent”?! How can nearly half of the companies be lukewarm about customer relationships? Retention can only be accomplished if you’ve got your heart in it.

Even more disturbing is the fact that 22% aren’t conducting any relationship marketing at all! These guys are probably spinning their wheels focused on customer acquisition – and letting dollars fly out the door when those customer don’t come back.

You can’t drive customer retention without establishing a real relationship with your customers

I found the results even more disconcerting because those same companies surveyed understand that it is cheaper to retain a customer than to acquire one and that consumers are tuning out from mass marketing.

70% agreed that customer retention is less costly than customer acquisition. So why aren’t more companies focused on building relationships to drive customer retention?

Folks, we need to move our companies to a more customer-centric focus in order to maximize customer retention! We’ve got to focus as much or more on customer satisfaction, loyalty and repeat buys than on lead acquisition if we want to improve the way sales hits the bottom line.

We must become masters of customer retention.

Customer retention strategies that work

Know thy customer

First and foremost, you’ve got to understand your customers. If you don’t know who your customers are or why they buy, you’re pitching to a black hole. Customers buy from you then disappear from view. You’ve got to take the time to understand your customer base.

The first step is to analyze how sales are made. Do customers visit your shop? Are you an ecommerce company? Evaluate the buying process for typical customers and learn what makes them purchase the way they do.

Look at how you track sales and, especially, how you collect customer data. Do you use a CRM and/or marketing automation platform? Can you create, define and measure characteristics of a customer profile? Explore what makes them tick.

Next, learn how to engage with your customers. Can you reach customers after a sale? Which devices are best for communication and buying activities? Find the best channels to develop a relationship. There is too much data floating around to ignore customer makeup. With a robust CRM and/or marketing automation system, your salespeople can have a granular view of your customers.

Deploy digital assets and offline marketing materials that are customer-centric. Though it is easier to quickly adapt digital marketing tools like email and PPC ads, print, TV and voice assets can be designed to speak to the unique needs of market segments. Use customization and personalization wherever possible to strengthen your connection with your customers.

Train in the art of customer-centric retention

The next step you’ve got to take is to train your employees to approach all phases of the business with the customer in mind. Train them in how to respond positively, how to resolve specific issues, and how to escalate the issue to a “higher up” efficiently. Four things to keep in mind when you’re training customer retention experts:

  1. Ask the right questions
  2. Understand the issue clearly
  3. Stay positive
  4. Confirm satisfaction before disconnecting



Resolve issues quickly

As I pointed out earlier, low customer satisfaction is a big reason you can lose customers (89% of consumers!). Put policies and procedures in place that are customer-centric and easily deployable. To retain customers effectively, you’ve GOT to replace issues with high-satisfaction outcomes. But it goes deeper than that: you’ve got to turn them around so they actively want to return to buy after an issue has arisen.

Set and meet expectations

Make sure your customers know what to expect when they buy from you and how your solution will fulfill their needs. Then go out and deliver on those expectations. After a win, reach out and thank them, then let them know what their future with your solution will look like. Ask them questions about their experiences with your solutions to ensure you are meeting expectations.

Build trust through nurturing the relationship

Don’t stop with detailed customer knowledge, great customer service, and quick issue resolution. Meet regularly with your customers. I mean digitally or with a phone call or text message. Find ways to connect on their terms, using their devices, and providing value to them.

Be Proactive

Anticipate problems that customers may have. Communicate how you can solve their problems before they get to the point where your customers will be looking for help. Use what’s called “anticipatory service” to show that you value them and wish to respond to their needs.

So, I hope I’ve made the case for making customer retention a priority. Believe, me, you’ll be glad you embarked on a customer retention program. Your bottom line will improve, your customers will be happier, and your salespeople will thank you for it.

Do you have customer retention practices not mentioned here? Can you do me one better? Let me know!

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