Just a 5% increase in customer retention can
increase business profits by 25%-95% — Bain & Company
In almost any business, the key to customer retention is a reasonably simple concept: proactively look after the needs of your customers and you’ll keep them happy. Most happy customers remain loyal and will keep buying your products and/or services — and of equal or greater importance — refer you to others. Although the idea seems blatantly obvious, many businesses fall short when it comes to implementation.
Bain & Company (a leading management consulting firm), in association with Harvard Business School, analyzed the cost of serving its customers over their purchasing life cycle. What they found was astonishing: just a 5% increase in customer retention can increase business profits by 25%-95%.
This one eye-opening statistic confirms what our consultants know very well at Ten5 CRM — it’s your existing customers that pay the bills. The bottom line is that customer acquisition costs much more than customer retention. It’s a case of the old “Bird in the hand is worth two in the bush” adage. Funny how these gems of the past turn out to be true, and apply to nearly every business.
Whether you’re selling products or services, turning current customers into future customers is key to your company’s success. Consider another statistic: Bain & Company (again pairing with Harvard Business School) revealed that 80% of companies in a survey said they offer superior customer service, but, only 8% of their clients agreed! You can read more in the article by Alex Lawrence at Forbes.
Clearly, companies have grave misperceptions about the quality of service they provide. The leaders of the companies surveyed must have been rather alarmed to hear what customer’s actually thought of them. These organizations likely made an about face and refocused their efforts on elevating their level of customer service. Or maybe not. Some companies just don’t get it.
For many businesses, a new customer can become a past customer as soon as they walk out your door or leave your website after their one-time purchase. Many businesses overlook just how important building a long-term customer relationship is. They fail to consider how difficult it can be to acquire a new customer and how much it actually costs them to do so.
In an increasingly competitive market with so many options for prospective and past customers to choose from, a focus on customer retention is no longer a nice-to-have. In almost all cases, the survival of your business depends on it.
How CRM helps with customer retention
CRM (Customer Relationship Management) is an important cog in the customer retention machine. Businesses that are unaware of the low quality of customer service they provide, may also have misperceptions about the value of CRM implementation. To be clear, CRM is not contact management — although contact management is one aspect of CRM.
CRM is central to customer retention, since it enables companies to manage customer relationships efficiently and generate additional revenue over the long haul, from the information stored in each customer’s record. CRM helps automate the proactive steps and communication required to deliver exceptional customer experiences throughout the duration of a customer’s relationship with your company.
What does this mean? Imagine this scenario: a customer purchases a product or service and provides their name and email address (with explicit CASL consent of course). Sadly, for many companies, this may be where the relationship ends because they don’t take advantage of this golden opportunity to engage further with their customer. Perhaps every so often they send the customer a marketing email promoting their latest sales or service offerings.
While these campaigns may lead to some additional purchase by the customer when they like the deal being offered; long-term, these can wear thin and become an annoyance. This lack of insight into strong customer relationship management won’t do much for customer retention.
What customers really want is helpful information and to feel good about their experience with your company, not just sales promotions flying at them. They want to know they’re appreciated and that you care about them as people, not as dollar signs in your accounting system.
Here’s where CRM marketing automation goes to work for you. In consultation with your company, Ten5 CRM can create workflows in a CRM system that is triggered by a customer’s actions. Now imagine a work flow that nurtures a newly acquired customer:
- A customer purchases a product or service from your company.
A human does this:
- You or your employee enters the customer email address into your CRM at time of purchase.
CRM does all of this:
- The customer receives an automated, but personalized thank you email.
- The system assigns the customer to a sales person and the sales person receives an alert.
- A week later, the CRM system sends another follow up asking the customer if they have any questions about the product or service you provided. The email includes the assigned sales person’s contact email and phone number in case the customer should have any questions. You also ask the customer to rate your service. The CRM generated email includes a link to a customer satisfaction survey.
- The customer clicks the link and completes the short survey. The system enters their rating and comments into their CRM record, as well as the integrated survey application’s database containing valuable customer satisfaction metrics. The CRM system then alerts the sales person and the sales manager of the survey results.
- If the customer gave your product or service a low rating, the sales person knows and follows up to address any issues head-on, the results of which are recorded in the CRM’s customer service module, which is also linked to their CRM record.
- In a month, the system sends an email inviting customers to an exclusive customer appreciation night with beverages and appetizers for your most appreciated customers. Recipients of this email don’t know it, but they were flagged for special treatment because of the poor rating they gave in the customer satisfaction survey. This provides you with an opportunity to meet them in person, show them you value their business, and develop deeper relationships that build long-term loyalty.
As you can see from the scenario above, CRM at its heart is about building and maintaining customer relationships. It provides a means of automating repetitive sales process steps, workflows and communications, so you can stay one step ahead of your competitors in efficiently and effectively managing your customer relationships.
Gartner Group statistics tell us that the “80-20 Rule” you may have heard of is true: “80% of your company’s future revenue will come from just 20% of your existing customers”. Having the right CRM system set up and tailored to the specific needs of your business will ensure that future revenues aren’t lost opportunities.
Find out what CRM can do for your company
Receive a free CRM consultation from Ten5 CRM. We’re located in Vancouver, BC, serving clients in Vancouver, Edmonton, Calgary, Winnipeg, and across Western Canada and the US.
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