Business relationships

How to keep customers for life

- October 28, 2006 2 MIN READ

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.

Want more articles like this? Check out the business relationships section.

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.