Thursday, June 25, 2009

Explore the Value of Customer Retention

Customer retention is not only a cost effective and profitable strategy, but in today's business world it's necessary. This is especially true when you remember that 80% of your sales come from 20% of your customer and clients. With these statistics I am wondering why most marketing and sales campaigns are designed for the new customer.

Take for instance the wireless telephone companies; if you sign a new contract you are given a large rebate or even a free cellular telephone. If you are a current customer you have the privilege of paying full price. With this type of promotion are we not just pushing current customers and clients to seek services elsewhere when their contract ends?

Perhaps we need to rethink our marketing and sales strategies, after all many experts will tell you that it's five times more profitable to spend marketing and advertising money to retain current customers than it is to acquire new customers.
However, there is a solution. Sophisticated technology and database equipment has made it possible for specialized firms to make attempts at customer retention through database marketing programs. Establishing a detailed client database will allow these companies to keep track of personal information and individual preferences of all their customers. This enables them to provide better service and value. Just like the corner grocery store owner kept information on 200 customers in his head, the large superstore can now keep track of 20,000 customers through its customer database. With effective implementation of customer databases, companies will be able to re-establish contact with customers, and will be able to work successfully towards increasing customer retention, repeat sales, and customer referrals.
To achieve the objectives of the database and customer retention programs, the entire campaign should be designed and carried out with the customer in mind. The exercise will only be effective if the customer recognizes and associates some value with being part of your database. If they do not perceive value in your program all of your communications, coupons, special offers, and newsletters will be discarded. Your customers have been inundated with meaningless "junk" mail and email spam, so embed your campaign with value.

A few value-add strategies that you can use include:
  • Membership cards and programs that entitle your customers to special offers, discounts, or preferential treatment.
  • Welcome, acknowledgement, sales recognition, thank you statements.
  • After sales satisfaction and complaint inquiries and surveys.
  • Event oriented communications in which the customer is genuinely interested.
  • Enhanced and empowered customer, after sales, and technical support.