Customer Retention: The Art of Keeping Good Customers

January 12th, 2016
Steven Howard

Customer Satisfaction is an Attitude. Customer Loyalty is a Behavior.

Why is customer loyalty so important?

For one thing, numerous research studies have shown that if you can reduce your attrition rate, that is the annualized rate of lost customers, by as little as five percentage points, you can increase your bottom-line profits by anywhere from 25% to 85%.

That’s right, just keeping more of the customers you have and preventing them from taking their business elsewhere can have an immediate, positive impact on your bottom line profits.

The reason for the increased profitability from loyal customers is that they stay longer, cost less to serve, provide higher margins, purchase across product lines, have less price sensitivity, and demonstrate near total immunity to your competition.

Many companies measure customer satisfaction, figuring that this directly translates into customer loyalty. While there is a direct correlation between customer satisfaction (particularly complete customer satisfaction) and customer loyalty, managers need to remember that customer satisfaction is an attitude.

Relatively high levels of customer satisfaction will not always translate into repeat purchases, particularly in saturated markets and industries, where your customers have many, many alternatives available to them.

Customer loyalty, on the other hand, is a behavior that is attained through consistently delivering high levels of complete customer satisfaction.

Another thing to remember is that not all customers are of equal value. Typically, a customer who has been with you for a longer time is more valuable than a more recently acquired customer. For instance, a customer who has been with you for five years is likely to be giving you 8-10 times the profit stream of a newly acquired customer.

Hence, if you lose a customer that has been buying from you for five years, you may need to replace that customer with not one, but perhaps eight to ten new customers just to replace the value of this one lost customer.

If there is one message you want to give your staff today, it may be a renewed emphasis on keeping and satisfying the customers you have. 

Keeping good customers is a more sure-fire method for future success than a constant focus on attracting new customers.

In the past, being customer-oriented has meant operating in order to meet the needs of the typical customer, or the average customer.

Fewer and fewer businesses today can afford to focus on the average customer. Your future growth, and future profitability, comes from satisfying the needs of your most valuable customers.

To treat your most valuable customers not as average customers, but as your most valued customers, requires that they be treated as individuals ─ with individual needs, wants and desires.

This is the true essence of why customer retention is the art of keeping good customers.™


KEY POINT:  your future growth, and future profitability, comes from satisfying the needs of your most valuable customers.

TAKING ACTION:  can you identify your most important good customers?  What criteria do you use to determine who is a good customer and who is not? Why?

What criteria do the people buying your products and services use to classify you as a good supplier? How closely aligned are these criteria with the ones you use in determining good customers? Where are there gaps between the two sets of criteria?

How can you tailor your products and/or services to better meet the needs of your good customers?

What can be done to increase the individual experiences received by your good customers when they interact with your organization?

This article is excerpted from the book The Best of the Monday Morning Marketing Memo, available at Amazon in both Kindle and paperback formats.

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