The Importance Of Customer Satisfaction And Retention
You’ve likely heard the old proverb: A bird in the hand is worth two in the bush. Intuitively, we all know that’s true, and chances are any one of us can point to numerous examples from our daily lives when we have acted upon the maxim. So why does that pearl of ancient wisdom fly out the window as soon as most companies sit down to draw up their budgets?
Nine times out of ten, to put it very conservatively, the focus is on consumer acquisition at the expense of customer retention. That’s understandable on some levels, both because businesses obviously do need to attract new customers, and because acquisition offers an immediate and readily quantified ROI on marketing expenditures.
But how much is a bird in the hand worth?
The evidence is piling up to show that what our ancestors knew about life applies to marketing as well. If anything, the old proverb understates the importance of customer retention – it costs up to five times as much to acquire a new consumer as it does to keep and nurture an existing one, according to research from Kapow. And that’s not all. Just a five percent increase in consumer retention can increase profits by as much as 125 percent, the studies show, and a two percent increase has the same impact on the bottom line as cutting costs by ten percent. On the flip side, the impact of customer churn due to poor service can be devastating, with 68 percent of departing customers saying they were driven away from a brand by indifference and impersonal service.
In a similar vein, as an article in Forbes reported, 80 percent of a company’s future revenue will come from 20 percent of its existing customers. Yet online retailers are still pouring 80 percent of their marketing dollars into acquiring new customers.
In the face of numbers like those, it’s hard to overemphasize the importance of customer satisfaction and retention.
Putting the focus on customer retention
It’s no mystery that customer satisfaction and retention are the direct result of a committed and consistent focus on putting the customer first. It’s only human for any of us to expect to be treated as a valued individual any time we enter into a business transaction, and it’s the brands that do that consistently that keep us coming back. In fact, yet another study shows that 81 percent of customers will pay more for such personalized service. What’s more elusive is knowing how to turn that knowledge into customer-centric practices that reflect and honor the importance of customer satisfaction and retention in day-to-day operations.
The good news is that today’s state-of-the-art tech tools can provide the data and analytics to give businesses an unprecedented understanding of what the customer wants, expects, and demands from a brand, information that lays the foundation for exceptional customer service and exceptional customer retention.
To put the value of customer retention in further perspective, the White House Office of Consumer Affairs pegs the Customer Lifetime Value of a loyal customer at ten times the value of their initial purchase. When you balance that against the expense of trying to reel in a new customer, it’s easy to see that customer retention is the key to building a stable business for the long-run.
Knowing what they want is the key to customer satisfaction and retention
Most of all, customers want to know, however many layers of technology are involved in a transaction, that they’re making a human connection. They want to be treated with courtesy and respect, and in today’s marketplace in which their options to go elsewhere are virtually unlimited, they are not likely to settle for anything less. They want consistent and reliable efficiency, accuracy, and responsiveness at every touchpoint of their customer journey.
It’s a tall order for businesses to deliver on those human values in the tech-based online marketplace. But (inescapably, if ironically) it is technology that can humanize the relationship between company and customer and build the loyalty that increases customer retention.
With the right tools, it’s possible to map the customer journey, glean important information along the way, and gain the insights necessary to optimize and personalize customer service. Armed with that knowledge, businesses can not only identify and prioritize loyal customers, but also anticipate their next steps and reach out to them with a relevant and timely email, for example. Similarly, they can detect the early warning signs of an established customer growing dissatisfied, and take steps to address their concerns.
This type of personalized attention pays dividends in two ways, both by enhancing the lifetime value of the customer retained and by potentially turning them into a brand advocate, a priceless resource for your company. As Henry Ford, founder of Ford Motor Company, said, “Coming together is a beginning. Keeping together is progress. Working together is success.” We know we are doing our job when we are not the only ones working to spread the worth of our brand, but it is these loyal customers that are giving thanks alongside us.