Customer Retention: The Art of Keeping Good Customers

August 23rd, 2015
Steven Howard

CRM Should Mean Customer Retention Marketing

The world in which marketing takes place has changed, and continues to change at a rapid pace.

Customers, customer needs, and the individual motivations for making purchasing decisions are also changing. The natural loyalty of customers is a thing of the past, not just because customers have become more fickle but also because the large majority of organizations do not exhibit any tendencies that deserve customer loyalty.

As customers become more knowledgeable about the options available to them, as well as more aware and understanding about their own individual wants, needs, and desires, the more they want to be recognized and understood as individuals. Without a doubt, customers give their business – and more important their repeat business – to the organizations that do the best job of understanding and responding to their individual wants, needs, and desires.

In this highly competitive marketing environment, organizations need to move from a transaction-focus and product-line focus to a customer focus.

Highly successful firms take this a step further, by developing techniques to continuously learn from interactions with customers. They also implement procedures that enable them to deepen customer relationships by properly responding to the insights gained from these interactions.

Early attempts at this direction have often gone wrong, for the simple reason that the global CRM movement convinced many senior executives that customer relationships could be managed.

No customer I have ever spoken with wants to have their relationship with a selling organization managed. The whole concept of taking an economic view of customers that measures the profitability of each individual customer and then attempting to manage (i.e. grow) those relationships that the organization finds to be profitable is, at best, one-sided and valid for short durations only.

In these highly expensive, technology-led CRM implementations, customer relationships are defined by product ownership levels, size of orders, and cross-selling opportunities. While all valid parameters from an organization’s perspectives, none of these are the key ways in which customers would primarily define their relationships with the organizations with which they do business.

Not surprisingly, customers actually want their relationships to be nurtured, cultivated, appreciated, cherished, and looked after. Anything but managed!

One of my personal goals is to help organizational leaders move beyond the primeval and self-centered goals currently being practiced in many operations to a business philosophy that is more likely to help retain the customer relationships critical to continued success. At the heart of this philosophy, which I call the art of keeping good customers, is the changing of the acronym CRM to mean Customer Retention Marketing.

Customer retention has a direct impact on corporate profitability. As one often-cited report in the Harvard Business Review showed, a decrease of just five percentage points in customer attrition can increase bottom-line profitability by 25% to 80% across a wide range of industries.
This makes your own customer base is a highly under-valued asset.

How important is the issue of customer retention? Another Harvard Business Review article stated that “the average U.S. corporation loses one-half of their customers every five years and these (attrition) rates stunt corporate growth by up to 35 percent.”

It is little wonder that an Economist Intelligent Unit article Managing Customer Relationships reported that “the number of businesses citing ‘customer retention’ as a critically important measure in the next five years has jumped to nearly 60%, as companies shift their focus from attracting new customers to retaining their more profitable ones.”

Successful companies today are switching from a transaction perspective with their customers to a customer loyalty-building perspective. The way to do this is to earn customer loyalty, by understanding true customer needs, committing to quality, delivering upon the promises you make, and by treating customers as people, not as accounts.

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 fully 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, desires, likes, and dislikes.

This is the true essence behind the concept of the art of keeping good customers.™

Key Point: you need to treat your most valuable customers not as average customers but as your most valued customers.

Taking Action: what is the focus of your marketing efforts, to win new customers or to keep your good customers? Why?

What benefits could be gained from moving a portion of your marketing budget to reduce customer attrition? Would these benefits be significantly increased if you reallocated a significant portion of the marketing budget to customer retention?

Do you measure the costs of lost customers? If not, how could you?

Which do your employees think is more important: keeping current customers or finding new customers? Why? Is this the best emphasis given your current and anticipated market conditions?


This article is excerpted from the book Powerful Marketing Minutes, available at Amazon in paperback and Kindle formats.


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