Why is Customer Retention Important?

The purpose of this piece is to suggest a cost-effective way to leverage a new customer from whatever means used, whether it is by direct mail, news paper advertisement, radio, phone book or some other resource. Customer retention has been a central concern of just about every marketing strategy since the Stone Age. The only difference between then and now is we use fewer clubs, hopefully.

Customer Retention = Higher Profit

The simple answer to the title question above is: customer retention leads to greater profits. In other words, keeping customers leads to selling more services or products. Cultivating an existing customer is far less expensive than seeking a single purchase customer. This is the most obvious advantage of customer retention because value is added through effective services or quality products that creates customer satisfaction. Repeat business benefits both the provider of the service or product and the customer through lower cost to the business, while the customer reduces their expenditure of time and money by not having to switch vendors.
Your business can directly benefit in a number of other ways when you and your employees focus on a customer retention strategy.

New Customers Cost More Than Repeat Business

Obtaining new customers can, depending upon the type of business, cost you five times more than satisfying and retaining existing customers. Obtaining new customers has certain costs associated with the effort. These include advertising, follow up, sales demonstrations, travel and meeting cost, to name just a few. Repeat customers already know your products or services, are aware of the order or renewal process, and can anticipate the quality of the transaction. All of this reduces the costs of attracting and servicing a new customer.
Further, repeat customers enhance the potential for other channels of advertising your business, for example, word of mouth. Word of mouth advertising is actually satisfied customers recommending you to their friends and neighbors.

Increase Your Customer Base

Increasing your customer base through development of repeat customers allows you the opportunity of building a relation with your customers that focuses upon meeting their specific needs and requirements. Thus, you have expanded your marketability while offering a service to your customers. As you gain a better understanding of your customers’ expectations, you will better able to meet their product or service needs. Thus, fostering an effective retention strategy will allow you to serve more satisfied customers. A number of studies have demonstrated how customer retention programs lead to improved relationships and increased sales through long term patterns of use of the same vendor.
Finally, customer retention has a direct impact upon your business’ profitability. Several studies have shown that a two (2%) percent increase in customer retention has the same effect on profit as cutting costs by as much as ten (10%) percent!
Service companies differ from retail businesses in terms of the average number of customers lost per year or service cycle, i.e., the number of useful years a product or service has before it must be replaced. The reality is that every business losses a substantial portion of new customers every year. A reduction of 5% a year in customers lost can represent an increase in profits as much as 25 to 125 percent, depending upon the type of business.
The bottom line is this: customer profitability rates tend to increase over the time you retain a customer.

Your Attitude and Your Success; They go Together

How is your attitude? A simple question, but rarely easy to answer. For most of us, the quick response is “positive”. However, in reality, a truthful answer is far more complicated. To begin with, each new day posseses its own set of issues which require a unique set of reactions. But, for our purposes, let's just focus on a few key elements that affect a successful business.

Are you inspired?

What motivates you each morning to open your business, to meet customers, to buy supplies, to repair equipment, to close a sale, or to pay your bills? The driving force that moves us to be in business and the degree to which we believe in it is our inspiration. Thus, the simple question “are you inspired” plays a key role in your success as a businessperson. How committed you are to your business, your products or services, your employees, and your customers will convey the level of inspiration you command. Your ability to perform effectively is based upon your belief in yourself and those who help you achieve your objectives because it ultimately determines, to a large degree, how effective you are in accomplishing your business goals.

Are you inspiring?

Of course, to reach all that you hope to accomplish will depend upon how well you are able to convey positive leadership qualities? Are your employees motivated to achieve your business goals? Inspiring people to want to work with you to meet your expectations is clearly one of the major challenges of every business owner. How well you accomplish this is central to your business success. This means conveying to your employees the inspiration necessary to motivate your customers to purchase services or products. And, this is achieved by clearly understanding your business values.
The image you and your employees project to your customers is based upon a heighten belief in shared business values. What you consider a fair price for your products or services is one. Another is customer service, such as, conduct of employees when dealing with customers, return policies, and the level of quality you demand in your products or services. These are just a few examples.
The point is this: You need to be inspired by the principles under which you want to operate your business.
This holds true whether you are a sole proprietor with no employees or have a large work force to manage. If you have employees, the critical factor is motivating them to share your business values. If they share your values then you are well on the way to a successful business future. But, make sure of your answer. Too often, we assume our employees are on board when the fact is they do not have a clue as to what their employer expects of them. Thus, it is your responsibility to inspire them by clearly articulating as well as demonstrating on a regular basis your business values. Consistency and frequency of your values, as demonstrated by you, will inspire your employees and customers because they will recognize commitment to principles that have lead to your success.
How committed you are to meeting your customers needs will be evident by your ability to successfully answer the questions above. Your ability to consistently follow through in meeting the challenges of a business owner are enhanced by your ability to inspire.

The Power of Referrals

Word of mouth advertising is the hallmark of any successful business. The importance of such advertising, besides bringing new customers, is its low cost. The trick is getting new customers in order to build your referral network.

Building your Referral Network

Advertising is an effective means of targeting potential new customers, be it coupons, online, telemarketing or phone book ads. However, getting the customer to call you is only the FIRST step of the process. Customers need to have a positive shopping experience; someone who has a good experience will typically refer their friends to your company. Statistics show that if a customer has a negative experience, they will tell many more people about it than they would a good one, so that's just one more reason to always go above and beyond.

When your product or service provides value and your customer is satisfied, the chances are that that experience will be conveyed to others. How do you generate such outcomes? Well, to begin with, people need your product or service. If this criterion is met, your next step is to provide excellent customer service, in a timely and courteous manner. Most businesses recognize this and put a great deal of effort into these functions to generate referrals.

Here is the best part, the more time and energy you put into developing referrals that you convert from existing or new customers, the more likely you are to increase the number of new referred customers. Thus, improving revenue flow and making your business grow.

Managing Referral Leads

Here are a few thoughts on how to successfully develop, reward and monitor your referral leads:

First, a referral lead from a customer or coupon is unique and should be treated as such. Every customer is special, but referred customers should be handled in such a way that they will refer other customers as well. Never miss the opportunity to sell customers on how important you consider their patronage. Make such customers feel important with a special offer or an event. Your sales and administrative staff should be involved in this effort as well. By doing this you will have sent a very important message to your customers that may cause them to send other friends or neighbor to your company.

Second, make sure you treat each new referral as you would any other customer, i.e., make sure you learn what they need, how your product or service will best meet their needs, and how you will assist them in selecting the right product or service to meet their needs. Almost all customers need to understand how your company’s product or service will give them added value. Do not assume they are completely sold on your company.

Third, you need to show your appreciation to the customer that gave you the opportunity to serve the referral. How you decide to do this is really a personal preference. Some gesture of appreciation such as a thank you note or a discount for subsequent purchase may be in order. Whatever you decide, make sure you communicate how important their faith in your company is appreciated.

Even if you are already obtaining a number of referrals, imagine the improvement to your bottom-line could be if you were to increase your effort in this regard by as little as five percent.

Facebook for Business: Setting up your Page

Last week, I told you all about the benefits of setting up a Facebook Page instead of a personal account for your business. Today, I'll show you, step-by-step, exactly how to do it!

This is a very basic tutorial; the customization possibilities are endless! (I'll give you some customization resources at the end of this post...)

First off, log in to your PERSONAL Facebook account. Because you must have a personal account linked to the Fan Page, it's best to start there!

From the Home page of your profile, scroll down to the bottom of the page, and look in the right corner. You'll see this:

 Now, click where it says "Create a Page" (I know, tricky, right? :))

Once you've clicked that, you'll see six large buttons, with categories, as shown below:

 Because we're talking about setting this up for a business, that's what I'll be focusing on, but notice the different options here; you can create a fan page for your favorite celebrity or TV show, or your personal website... many bloggers will set up a page as a way to increase their readership as well... there's a category for everything!

Once you choose the "Local Business or Place" button, you'll be prompted to choose a more specific category, and to fill in your business name, address and phone number:

 Once you've filled that out, you'll be asked for a Profile Photo. Even though you're given the option to skip it (small text next to the Continue button) I don't recommend it. Speaking from personal opinion and general experience, an account that lacks a profile photo is often ignored or overlooked as junk or spam. Even if it's just your logo, putting *something* there is better than nothing! It only takes an extra moment, so I really encourage you to do so at this time.

 Once you've uploaded your profile photo, you have the opportunity to invite people to Like your page... you have both the option to invite  your existing Facebook fans, and to pull email addresses from your contacts.

 And there you go! It really is that simple to set up a basic Facebook Fan Page!

When you're ready to take your page to the next level, there are limitless options... if you set up a "Welcome" tab instead of just having new fans land on your Wall, you have a higher probability that they'll Like your page. You can google "facebook welcome tab design" to find help on how to do it yourself, and there are also professionals that can help you with this service as well, if that's a better option for you.

Some companies who are really taking advantage of the custom possibilities are Red Bull, Hotel Max, and Mazda USA. Have you done something really interesting and fun with your company's Facebook Page? Link me up! I'd love to see it!

Facebook for Business 101

So, your company wants a Facebook page... Facebook, with its 750 MILLION active users, is "the place to be" online, and the cornerstone of many corporate social media efforts.

You've probably had your personal page for years; maybe you're hooked on Farmville, you enjoy keeping track of old friends from high school, or you use it to coordinate your kid's busy social life and share photos with friends.

Whatever you use Facebook for now, the way to use it as a business is different, and for good reason. I'll be describing some of the things you should keep in mind along the way, as you set up your company's Facebook Page.

Personal account vs. Page

One of the most common mistakes I see is when a company sets up a personal account like it's a person: first name Miller & Sons, last name Painting. One quick way to tell is to see if, at the top of the page, you see a "Send Friend Request" or a "Like" button. Pages allow people to "Like" them, and personal accounts add friends.

When someone "friends" you on Facebook, the information that you're allowed to view is different than what's available to you when they "like" your Page. As a Page, you have fans instead of friends, and you're limited in that you might not see their status updates or the photos they share, but the information that you gain access to is invaluable to a business looking to track the effectiveness of their Facebook campaign.

The Facebook Insights Summary

If you ask me, the best thing about a Facebook Page is their Insights feature. It tracks what kind of reaction your posts are getting; it shows you, on an easy to understand line graph, when you're getting new fans, and when you're getting comments and likes on what you're posting. It breaks down all of that information and shows it to you, right inside your Facebook account.

Facebook Insights User Overview screen

Besides being able to see this information, you can export this data to an Excel file to track it long term. It's also nice, from an efficiency standpoint, to be able to switch back and forth between your personal account and your Page.

Just click on your name to switch accounts!

When you're set up as a Page, you can grant other people access as an Admin, so you aren't the only one responsible for posting content. Have someone else assigned as an Admin and they can also post on your behalf, so your account doesn't sit ignored just because you're on a much-needed vacation!

Now that I've sold you on the benefits of a Facebook Page instead of a personal account for your business, the next step is setting it up! Come  back next week for step-by-step instructions on how to do that, and please feel free to leave any questions you might have about Facebook, and I'll do my best to help you out!