Jul 7, 2010
Where should you spend your marketing dollars? How many new customers have you lost in the last five years? How many customers have you gained in the last five years? How important are your customers to you? (Silly question?) Consider this statement from The Harvard Business Review which said that the average business loses 50% of their customers every five years.
Which is better: retaining current customers or adding new customers? That really is not a question that you can answer without saying both are important. Authors Emmet C. Murphy and Mark A. Murphy made several impressive statements in their book, Leading on the Edge of Chaos.
- Acquiring new customers can cost as much as five times more than satisfying and retaining current customers
- A 2% increase in customer retention has the same effect as decreasing costs by 10%
- Depending on the industry, reducing your customer defection rate by 5% can increase your profitability by 25 to 125%
- Customer profitability tends to increase over the life of a retained customer
What is the likelihood that you will retain your customers? What do those numbers mean to you and the success of your company? Have you evaluated your customer retention rate? Do you have a plan to keep your customers? Do you have the tools to make that job easier? Here are the reasons customers leave, according to the U.S. Small Business Administration and the U.S. Chamber of Commerce:
- 68% leave because they are upset with the treatment they’ve received (Customer Service)
- 14% are dissatisfied with the product or service
- 9% begin doing business with the competition
- 5% seek alternatives or develop other business relationships
- 3% move away
- 1% die
Perception versus Reality: RightNow Technologies says 73% of customers leave because they are dissatisfied with customer service, but the company losing the customer thinks only 21% leave because of customer service. The company losing the customer thinks 48% leave because of price, when in fact only 25% do so. It is hard to believe that our customers don’t love us. We would rather believe that price is the culprit. It hurts our feelings less, but costs our companies significantly more, because not only have we lost the customer, but more than likely we lowered our prices to try to keep them.
What should you do? Well, first, find out why your customers leave. Do not believe that your customers will not leave; that your customer service is too good for your customers to leave. Make sure that you understand your customer’s needs and wants. There are many resources that can help you develop strategies to retain your customers. Start by doing a quick search on the Internet. Your employees will frequently have the best ideas; ask them.
Customer Relationship Management: One of the ways we can help is by helping you define your customer relationship management strategy. You do have one, don’t you? Since the software CRM or Customer Relationship Management has become popular, many people think that CRM software is the same thing as customer relationship management. It is not. Software is a tool that you can use to leverage your efforts, but CRM software cannot do the job by itself. What can CRM software do to help you improve your customer service and reduce customer defections? The answer to that question will vary depending on your company, your customers, your product and your sales methodology. Below are some of the most common ways to use CRM software, but you must tailor CRM to your company’s strategy.
Sales and Marketing: Most people think of CRM as a tool for marketing or salespeople. It is. CRM can, and should be used for marketing. It is a natural place to store your lists of leads, suspects, prospects and customers. Your salespeople can use CRM as a great tool for quoting, building your sales forecasts and tracking customers and prospects who need follow-up.
Operations and Production: CRM is a great tool for sales, but if you stop at the salesperson’s desk, you have left more than half the value in your CRM database. Your operation and production staffs are the people who fulfill your sales and marketing promises. Shouldn’t they know what Sales promised? If you track your sales activity in CRM, they can. How many times does your sales staff call operations to find out the status of an order? If your operations staff uses CRM, your salespeople will know how the fulfillment process is going.
Your best opportunity to keep customers – Complaint Tracking and Resolution: Is your customer complaining? Thank your lucky stars – according to 1st Financial Training Services, 96% don’t complain, they just leave. 91% of customers who leave will never come back. When things go wrong, track your customer complaints in CRM and everyone in the company can be involved in the solution. This is when you really get the opportunity to fulfill your promises and to reduce customer defections by resolving the problems quickly and efficiently.
What’s next? As we said earlier, CRM is not your customer relationship management strategy. It is, however, one good tool to use in your strategy to retain and gain customers. Contact us for a FREE Business Process Evaluation to see if CRM can benefit your company.
- Online: http://www.bautomation.com/contact/free-consultation/
- Call us toll free 877-571-8580 or 763-571-8580
- Check out our white paper “How to Accelerate out of the Downturn with Sage CRM” at http://www.bautomation.com/resources/sage-downloads/)
- Ask for our white paper, “How to Choose CRM Software”
[...] service – Poor customer service accounts for 70% of customer loss. Marketing should take that number very seriously and work with the support team to deliver [...]