Four steps to customer retention (and a
happy new year)

When going for growth do not neglect the sales revenue closest
to home, advises Richard Higham
 
 
 

The starting point of good selling has got to be to hold on to
what you have got. It is no good having an aggressive new business
target if you are pouring water into a leaky bucket. Some would say
that if your ‘rebuy rate’ is less than 80 per cent, do not waste
time and money on growth – fix the hole in your bucket
first. 

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Customer retention may be tough but it is a lot easier than new
business. Sometimes it is tempting to look at exciting new options
when the real priority is much closer to home. 

There are four steps to effective customer retention:
segmentation, service, systems and selling.Together they give you
customer stability – and customer stability gives you
profitability. 

Many successful sales organisations segment their customers by
type of buying behaviour: loyal; relationshipbased; value-seeking
or fickle; transactional or price-driven. Treat each customer
differently – and be prepared for different responses. Constant
stimulus and repetition of sales offers will work with the fickle
transaction customer.A more subtle, less salesy approach will be
needed with the loyal, relationship customer. 

Second: service. Excellent service builds a brick wall around
the customer.They may be tempted by a competitor’s knock-down
price, but your good service will make it harder for them to leave
you. Make sure your service is as good as you think it is. Use
customer surveys (but use them well); conduct reviews with top
customers. Follow the example of one finance business we work with
by getting a senior manager to call one customer each week, simply
to check that all is well and tell them that you value their
business. Good service sells repeat business. 

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Thirdly ask yourself if your systems are working for or against
you. Do they flag up contract end early enough? Is there a sound
system for contact? I was speaking recently to two lenders. One
sends a letter a month before a particular rate is due to end but
no one is instructed to follow up.The other builds in an automatic
diary reminder in the relationship manager’s diary two months
before the end and monitors follow-up rates. Hardly surprising then
that the latter consistently wins business from the former and then
retains it!

Think too about your reward systems.Are you just paying people to
win new business or are you also rewarding highly profitable but
less glamorous retention?

Finally, are you selling actively to your existing customers? It’s
ironic that no one knows a customer better than their existing
providers, yet all too often we fail to sell to existing
customers.We don’t want to seem greedy. Or we fear we will damage
the relationship. Or we think that we have already got what we came
for.Yet customers expect us to come to them with new ideas, new
offers. If we have been doing our job they will want to stay with
us. So why surrender your hard-won ground to your
enemies? 

Customer retention is the key to profit but it is often
overlooked. Review your segmentation, your service, your systems,
your selling and seize the opportunities that lie within your
grasp.

The author is global sector head, financial & professional
services, Mercuri International.