How to keep customers for life

We all know the adage that it’s a lot cheaper to keep customers than it is to get new ones. Dan Kennedy, one of the world’s leading marketers, has conducted a study into why businesses fail to keep customers.

Here are the reasons customers leave:

1% die
3% move away
5% follow a friend or relative’s advice and switch to their recommended supplier
9% switch due to a better price or better product
14% switch due to product or service dissatisfaction.

Whilst the first two may be out of your control, you should be able to do something about the other 28%.

However, all of the reasons above still only account for a total of 32%. Why then do the other 68% of customers leave a business? Simply put, they leave because of the indifference of the business – they feel unappreciated, unimportant and taken for granted.

So what can you do about it?

1. It's a marketing function

Firstly, start viewing customer retention as a marketing function and profit centre rather than an operational expense.

But how much should you spend on retaining a customer?

This is a difficult question for me to answer on your behalf, but $40 to $50 per customer per annum would be a good place to start. Ask yourself this question – how much would it cost me (money and time) to replace this customer?

2. Develop a program

Secondly, put in place a customer retention and appreciation program, including frequent contact and communication. Examples of items you could include in this program are a newsletter, greeting cards (Christmas and/or anniversary date of their first order), useful information (e.g. clipping of an interesting article or producing a special report) or small gifts.

Contact should be at least monthly, and possibly more often.

Remember, though, that this is a customer contact program. Do NOT make the mistake of sending lots of “sales pitches” and thinking these are your “customer touches”.

Whilst it’s okay to send the occasional sales pitch, the majority of these communications should be seen as giving something of value.

3. Go after your lost customers

Thirdly, go after those customers whom you’ve lost or are losing. By tracking customer activity, you will be able to tell when a customer is not using your services. When this happens, send them a letter with a special offer or gift, or perhaps ring them up to ask them why.

How much should you spend on saving a customer that’s about to leave you?

Well, you need to know how much it costs you to get a new customer. Then, as long as you’re spending less than that, it’s profitable to spend to keep them.

In other words, you could afford to spend anything up to $1 less than it costs to gain a new customer and still be ahead! Plus, as the saved customer already knows you there’s very little time needed to train them in your systems.

Increasing customer value

On the other side of the coin, you should be looking at how to increase and maximise the amount of money that your customers spend with you. One of my other articles elaborates on four ways to increase customer value.

Peter Griffin believes informative and genuine newsletter are the most powerful marketing tool. He helps small businesses get their newsletter started - even if they only have a few dollars a month and just a few contacts!

7 comments | Add your own

Nice one, Peter. Being a soloist is a fabulous way to live, but we still need to eat and its our loyal customers who feed us ! Grant Hyman from Sydney | Read my articles
Thank Peter. How personalised should a customer contact be? what is the balance between sending all customers the same thing vs something that really is just for an individual? Linda Anderson from Sydney, Australia | Read my articles
Hi Linda, as always it depends. An e-mail newsletter can be personalised at a simple level using your contact's first name, which is a nice touch. Some programs even allow segmenting groups of customers so that the content can be tailored more to that group.
Other communications like cards etc should always be handwritten, and a short sentence referring to something specific about that person (eg How's Muffin your cat going?) can be a nice touch.
Some items may be more individual. For example, a newspaper clipping may relate to a customer's business, so that would be very individual. A gift can be fairly individual - eg wine for some, book tokens for another, theme park discount coupons for someone who's mentioned they're going to the Gold Coast for a holiday.
So really try to mix the standard with the more individual elements.
Hope that helps (my preference is wine, thanks!)
Peter Griffin from Sydney, Australia | Read my articles
Hi Peter
Would you agree that marketing is, (is going to be) the single most important thing in business, whether we are talking soloists or big/ger business? Astrid McCormick from Coach Mid North Coast NSW
Hi Astrid, in a word yes. Doing the work we want to do is a reward for us first finding customers to do it for.
But marketing should not be thought of as cold call phoning (Something I've done a fair bit of in my time, but that's another story). Marketing is more of an everyday process of doing thingsthat will help to fill the pipeline - eg writing articles, sending out direct marketing letters to target market companies, sending out newsletters meeting up with contacts, staying in touch with prospects and customers, targeting potential referral partners, following up with prospects regularly, networking, advertising, press releases, thank you cards, designing a referral scheme for customers, etc, etc, etc. Aim to spend 1-2 hours per day, more if you're a start-up, and it'll start to pay off within 45-60 days - I can guarantee it! Peter Griffin from Sydney, Australia | Read my articles
Good one Peter! This really opened my eyes to see what my true passion is in life... to Market! Allison from Sydney
Hi Allison - good on you! If you have any good ideas that you use in your marketing, I'd be interested in hearing about them. Peter Griffin from Sydney, Australia | Read my articles

7 comments | Add your own

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