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Over the past few weeks, we have discussed three ways to help grow your business:  Gaining more customers, Get your customers to make larger average purchases, and getting your customers to make multiple sales; now, it’s time for a fourth idea to grow your business — customer retention.

Customer Retention — How To “Insulate” Your Customers From Your Competition

Now let’s talk about the fourth method you can use to grow a business… your business… in fact, any business. And that is, to extend your customer’s “buying lifetime.” We call that, “Customer Retention.”

Here’s what I mean: How long, on average, do the people who buy from you… your customers… remain your customers? What really is your customer retention rate?

In other words, how long do they continue doing business with you before they move on? Are they one-time buyers? Do they stay with you for a year? Five years, or ten years? Have you ever stopped to figure out your real customer retention?

And then, what are you doing in your business right now to make sure your customer retention is high and your customers continue doing business with you?

If you don’t have a strategic plan… a working system in place you are going to lose a certain percent of your current customers to the competition. There’s no question about it. Your competition… right now… right this very minute is making plans and taking steps to take your customers away from you.

Now, the question is not, “What are you going to do about it?”

The real question is, “What are you currently doing about it?” “What are you doing about it right now?” What systems do you have in place to keep your customers from defecting to the competition?

Let’s talk about your customers for a minute. Are they thrilled enough with the products you offer and the services they receive from you to continue doing business with you year after year?

What if you answered “yes” to that question? Well, my next questions would be, “Are you sure? How do you know? Have you asked them? Do you have a system in place for finding out?”

Notice that I said, “Are they thrilled enough?” Not “are they satisfied enough?” You see, there’s a big difference between being thrilled and being satisfied.

In fact, last year, more than 200 million Americans stopped doing business with companies that they were “satisfied” with. And sixty percent of so-called “satisfied” customers switch companies or brands on a regular basis.

You can’t afford not to thrill your customers, nor to build trust in you and your business. The cost is too high, and unfortunately, most business owners simply don’t understand it.

Failing To Provide Exceptional Value Can Cost You BIG Time in Customer Retention

Let’s take a look at what the potential cost could be to you if you fail  to work on and improve customer retention:

Let’s say that your average customer spends $80 per year with you.

And let’s say that for any number of reasons, 100 customers stop doing business with you each year. They may die or move away. They may no longer have need for your products or services… they may switch companies, have a relative in the business, or have a bad experience with someone in your organization.

Or they may just simply disagree with some policy you might have. It could be a falling out with an employee, a personality conflict, miscommunication, a product they wanted that wasn’t in stock, or perhaps a feeling of neglect from you or someone in your company. It really doesn’t matter what the reason, they just stop doing business with you.

Well, those 100 customers no longer spending $80 with you this year just cost you $8,000.

But that’s not all.

What if those 100 customers tell 5 others about their experience with you? That’s an additional 500 potential customers who won’t be doing business with you this year (or maybe ever, for that matter).

And if each of them spent an average of $80, that’s $40,000 you won’t be receiving from them… PLUS the $8,000 you lost on your existing customers who left.

That brings the total in lost revenues to $48,000 in just one year!

We’ve worked with insurance companies whose agents write a hundred auto applications (or more) every month. That’s twelve hundred, plus, applications a year.

And they end up only gaining 150 or 200 at year-end.

Well, what happened to the other more than 1,000 policies? Where did they go? What happened to their customer retention rate?

Surely, they all didn’t die or move away. But you know, most agents… and most other business owners, for that matter, don’t concern themselves with what or whom they’ve lost. They just focus on their net gain.

They figure that if they finish the year with more policies or more customers or more sales than they started with they’re ahead.

Now, let’s suppose that you gave those 100 lost customers reasons good, compelling, life or business enhancing reasons to continue doing business with you this year.

And let’s suppose each of them told those same 5 people about their now-positive experience with you.

Well, there’s $8,000 you wouldn’t have lost in the first place, and another $40,000 you may possibly pick up from their referrals or by their word of mouth.

Your Customers… The Most Valuable Business Asset You Have

The point is, customers are important. In fact, they’re critical. There’s no question about it. You and I both know that.

A business can’t remain in business, unless it has someone to buy its products and services. And those “someones” are people. Real people. People like you; people like me.

And businesses don’t buy from businesses. People in business buy from other people in business. It’s people that you market to. Not businesses.

Some businesses or professions refer to the people who trade with them as customers, clients or guests. Others call them patients, passengers or patrons. Insurance companies use the term “policyholders.”

It really doesn’t matter what name we give them, what’s important, is that without people who are willing to trade their dollars for the products and/or services that you have to offer, you won’t be in business very long.

Now, here’s an interesting point: Most business owners know exactly how much they have tied up in furniture, fixtures, equipment and inventory.

They can tell you nearly to the penny how much each item costs, how old it is, how much it’s depreciated and what the remaining life expectancy is.

That’s important information for any business to have; there’s no question about it. But what’s amazing is that very few business owners have any idea of what the value of their most important asset is…their customers. They have no idea about their customer retention.

Now, think about how this whole concept of customer retention relates to your business for a minute. What is it that you can do… specifically, to extend your customer’s buying lifetime with you? How do you improve customer retention? Why not take a few minutes and answer these questions.

First of all, who are your customers… those who are buying from you now? Do you have a method of capturing their name, address and phone number? Do you have a way of determining how often they purchase from you? What their favorite colors, sizes or styles are?

And what about your staff or employees? Do you know how they treat or feel about your customers? Do they, or do you, for that matter, have favorite customers? What makes them a “favorite?” Is it how much they spend? How often they come in or buy from you? Is it their personality? And how do you treat those customers? Any differently than the others? Are your employees invested in your customer retention?

Do you have regular employee meetings and talk about how to think like a customer? What you would want if you were a prospect considering doing business with you for the first time? Or, maybe an existing customer considering giving repeat business to your establishment or organization? Or maybe considering referring a friend, a family member or an acquaintance?

Do you have a training system in place to teach your staff how to handle or deal with difficult customers? Short-tempered customers? Analytical customers?

Do you have a plan for moving people up the “Loyalty Ladder?” From Suspect, to Prospect, to Shopper. Then on to Customer, Client, and Advocate. And finally to convert them into Raving Fans?

When a customer stops doing business with you, do you know why? Do you have a system in place to find out? What would you have to do differently to get your customers to buy from you for… say, 5 ½ years, instead of just 5 years? Bottom line is this — what do you have to do in your business to increase customer retention, year after year?

Believe me, if you will actually take the time to go through these questions and formulate answers for them… and then incorporate that information into your business practices, you can work wonders towards extending the buying lifetime of your customers. Your customer retention will soar! And as a result, you’ll add significant profits to your bottom line.

If you would like to explore ways to grow your business through customer retention or a variety of other ideas to help you, contact us today!

Read all about it in Coffee News!