Customer Loyalty – You Don’t Know What You’ve Got Till it’s Gone
Some commentators such as Royal Mail have said that it costs up to 10 times as much, some have suggested even 20 times, to find a new customer than it does to retain an existing one. Whatever the true figure, one thing is clear, in the current and future economic conditions it makes sense to hold on to all the customers you have worked so hard to win before you start looking for new ones.
So how do you hold on to a customer and why do people leave you? Well the latter is pretty easy to explain and, once more, there is much documented evidence around. What is clear is that customers rarely leave you because of price. In fact anything up to 85% of your customers may not be price sensitive at all. Around 10% will leave you for a competitor’s offer, however 70% will leave you if you are perceived to be indifferent to them and their needs. The message is clear – if you want to maximise customer retention then the priority areas for action are:
- Maximise customer service excellence across the business; know what your customer wants and deliver it.
- Build relationships with your customers; people like to buy from people they like.
- Clearly understand your price/value proposition, USPs and guarantees offered.
- Know your competitors and their product ranges
Customer loyalty is the key. Harvard studies show that increasing customer loyalty by just 5% can increase profitability by a full 25%.
So what not to do? Evidence also shows that cutting prices is almost always folly. Margins fall and so much new business is required to replace lost revenue it is almost impossible in a recessionary market to recoup what you have discounted away.