The Value of Customer Retention
Customer retention is one of the few ways to ensure long-term financial success. Consider this: A 5% increase in customer retention can increase profits 30% - 50%. Not to mention that recommendations from existing customers can account for up to 60 percent of sales. Satisfying customers is not a new concept, but it's one that isn't easily mastered. Many retailers spend time and money attracting new customers or creating new customer satisfaction slogans when, in fact, retailers should spend time considering the lifetime value of each customer.
Stew Leonard, one of the most iconic and successful independent grocers of all time, recognized the lifetime value of his customers. Years ago he figured that the average customer would shop with him for about seven years before moving to another neighborhood. Since the average shopper's monthly food bill was $250, he figured each customer was worth $3,000 a year in sales, or $21,000 over the course of seven years.
Current day market basket values are much higher now making customer retention even that much more valuable. Armed with this knowledge, he was much more willing to replace a carton of cracked eggs or to provide an extra service -- all in an effort to create a lasting, profitable relationship with customers. Stew recognized that developing a long term relationship with valuable customers requires providing satisfying experiences over many visits and focusing on key customer relationships.
Satisfying Offers
A retailer has a lot to offer - from merchandise to service. To ensure you're providing a complete and satisfying offer, incorporate the following elements into a continuous improvement program.
- Customer Satisfaction Index. Monitor the performance of each point in your offering - through ongoing customer surveys.
- Satisfaction Goals. Establish clear and challenging customer satisfaction goals for employees at all levels.
- Value Driven Initiatives. Continuous improvement efforts should focus on areas that customers value most.
Success at the point of service recovery is critical to customer satisfaction and depends upon employees. When a customer's experience is disappointing, the first associate they contact must be empowered to resolve the issue. Associates must:
- Understand your policies completely
- Be Committed to satisfying customers
- Be equipped and empowered to resolve issues
- Be rewarded on the basis of customer satisfaction goals
Not all customers provide equal value over the long term. Relationship developing efforts must focus on the most valuable customers, including:
- Defining valuable customers to the company
- Identifying and understanding their needs
- Ensuring the offer meet their needs
- Focusing marketing efforts to effectively reach, attract and retain them
Create Closeness with Customers
Loyalty stems from a feeling of attachment or closeness. Key components include: - Customer Focused Culture - All levels in the organization must exhibit customer focus
- Employee Satisfaction - The employees must feel welcome to make customers welcome
- Customer Recognition - Customers should receive extra value for staying loyal
A focused effort requires understanding of results Success in retaining valuable customers must be quantified, understood, and translated into actions. Key tools include:
- Customer retention measurement
- Customer satisfaction measurement
- Valuable customer defection analysis
For more information on this topic contact Pat Fitzpatrick at Atlanta Retail Consulting Inc
