12Mar, 2018

Customer retention – all your customers are at risk! So keep them happy

I was recently asked by a connection about handling customers that were “at risk”. I asked them what they meant and it turns out they had a customer retention issue and wanted to reverse this. The connection went on to explain how his team had analysed the data and identified which customers were most likely to churn. My response was that they were acting much later than they needed to, and should focus on stopping customers from being in the “at risk” category in the first place by keeping them happy. Certainly this is much easier than trying to remove a customer from this group. I believe the first step is to acknowledge that all your customers are at risk, all the time.

At Risk Customers

A few years ago I sat in a board meeting where myself and a few directors were discussing our “at risk” strategy. We were losing customers and our instinct was to focus the sales team on schmoozing our key accounts (so that they felt loved). This reminded me of an anecdote I once read: The FD walks into the MD’s office:

FD: “I have got some good news and some bad news.”

MD: “Ok I’ll have the good news first.”

FD: “The good news is that we are hitting our retention rates. The bad news is that we missed our new business number.

MD: “I know what to do! I’ll chat to the commercial director, put together an acquisition campaign and focus the sales team on new business. Can you and your team focus on a promotional offer? I’ll chat to the operations director and her team to focus on supporting our acquisition efforts. Oh and also marketing can get behind this so we will focus them on this too. “

One month later the FD walks into the MD’s office:

FD: “I have got some good news and some bad news.”customer retention and at risk wondering emoji

MD: “Ok I’ll have the good news first.”

FD: “The good news is that we are hitting our new business number. The bad news is that we missed our retention number.

MD: “I have a plan!… I’ll get my sales team on it!…”

This exchange describes the cyclical nature of how many businesses deal with customer retention. Unfortunately this strategy is not effective. Assuming that this company has no other strategy, they are only slowing down of a likely outcome, which is customer losses. So how should companies deal with customer retention risk?

Proactive Customer Retention

All businesses should realize that all their customers are ‘at risk all the time’. Customer retention risk is not a sudden paradigmatic shift. It is usually gradual and it can be mitigated. Here are some of the risks that businesses face and how they can be mitigated:

A disruptive competitor enters the market

This is particularly hard for market leaders to deal with as the new competition’s sole purpose is to grab your customers and usually with a “better, quicker, cheaper” message. This can be mitigated by:

  • Providing inward investment for innovation, don’t wait be disrupted to react and be on the front foot.
  • Listening to customers and knowing your market. Establishing credibility will tell customers that it is you and not the new inexperienced business that knows what it is doing.
  • Creating and maintaining a strong brand presence. Establish your brand as the go-to for your products, with ‘everything else is a cheap imitation’. However, do not become arrogant and blind to market changes which could affect you. No company is 100% immune to external change.

Bad customer service

There are a couple points to look at as people view bad service in different ways. For example, as a service that isn’t quite working how they expect, or maybe they experienced a bad interaction. These points can be mitigated by ensuring that the responsibility for retaining business is company wide:

  • Have a product that works and is easy for customers to work out. Which goes back to investment in innovation mentioned earlier in this blog.
  • Invest in people, train your staff and only have capable people speak customers. The wrong person could very quickly damage your reputation.

The main contact at the customer leaves the company

You or your sales rep could have spent years establishing a vital relationship with key people at your customer’s organisations. This is good, after all ‘people buy from people’, but what if those people leave? The relationship can reset and maybe your new contact has other supplier preferences or views your company less favourably than their predecessor. There are a couple of ways to avoid this:

  • Your products and services need to transcend individual relationships. Ensure that you have good relationships across your customer’s entire organisation.
  • Ensure that there are multiple people in your company engaging with the same customer. This helps mitigate the risk of your exiting staff taking your customers with them when the depart.

Delivering the wrong messages

Customers have decided to buy, which is great. However, bombarding them with irrelevant messages can annoy people especially if it is of a high frequency. To handle this:

  • Have the right types of interactions with the right customers at the right time and avoid disenfranchisement. This is a cross-departmental effort that requires a joined-up plan.

REMEMBER: Make client retention proactive

At the moment too many businesses have reactive customer retention strategies. That means that they are simply acting too late, when the customer has already decided to stop buying from them. Customer retention should be proactive to stop customers from looking elsewhere in the first place.

About The Author
I am a proud husband, father and space-nerd. I love business and data so I try to combine the two as much as possible. This passion led me to launch Geopify.