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June 06, 2009

Customer Retention: The First Step in the Battle Against the Recession

Written by  Barney Gershen
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Retaining old customers is the least expensive and most efficient way to grow, so customer retention is more important than ever, especially given our current economy. It is financially five times more efficient and profitable to keep a good customer than to bring on a new client.

Of course, it is more flashy to get a new customer than the hard work (day-after-day grind) it takes to keep the existing customer. The proven customers become more profitable based on referrals, familiarity with accounts, opportunities to sell more services and your being in the position to command a premium for services.

Well over 50 percent of retaining customers is about relationships, and a surprising 25 to 50 percent is about goods and services. People buy from people. Customers stay because of people, and customers leave because of people. Therefore it is extremely important to pay a significant amount of attention to the “people part” of your business.

Retaining customers is like golf—simple, but not easy. It requires a well-developed strategy executed at every touch point with your customers: from receptionists to delivery drivers; supervisors to salespeople; and C-level executives to you. Everyone must share the responsibility for the reputation of your quality service. This requires leaving your ego at the door and listening responsively to your customer, even when you disagree.

Focus: Some Suggested Strategies

• The cornerstone of customer retention is providing excellent service. This is the essential upon which you build for the future.

• Customer retention requires face-to-face contact at many levels. You cannot maintain customer relationships from e-mails, phone calls, letters, etc. They can enhance the relationships, but these methods cannot be depended upon to secure the bond. Make time for face-to-face meetings. Follow up, and then follow up again. Get out of the office and in front of your customer.

• Promptly and enthusiastically answer phone calls, e-mails and letters. Report any endangered customers immediately to the appropriate person and make certain that they are added to the exception report or at-risk list.

• Those employees who have daily contact with the customers must be aware of their importance and of their appearance and demeanor. They must be trained to listen to and converse with customers and be able to give good intelligence to the management (i.e. about expansions, closures, levels of satisfaction, etc.)

• Using the 80/20 rule, I suggest that customers be separated into two categories. Determine which ones have the commonality of being both profitable and voluminous. Generally only the top 20 percent, who are both profitable and voluminous, should become your most valued (top eight or 10 program) customers. Closer studies will reflect that the other 80 percent are not substantially profitable and require similar energies. Bonding should be cultivated between your level and the top executive level at the target companies (multi-level bonding). These added “touch points” keep an increased awareness of what is going on within the company and make the CEO a “sort of” last chance/defense if the account is in jeopardy. It is shrewd to maintain two or three contacts at different levels. In this way, disruptions in staff will not negatively affect the customer bond.

A regular and intense program of customer contact is essential. This involves:

• Face-to-face meetings with extensive preparation.

• Listening attentively to the customer.

• Following up from past review action points.

• Asking for a grade from one to 10 on quality of service and then asking for ways that you can improve that score.

• Execute without exception.

• Bill Gates said, “Your most unhappy customers are your greatest source of learning.”

Also, remember:

• The results of quarterly reviews with customers need to generate an exception report (customers you are at risk of losing).

• Be willing to set aside the time and resources necessary to develop a strategy/program.

• Develop and execute weekly your customized strategy of monitoring customer satisfaction.

It can become easy to lose established customers the moment we stop treating them like new customers. When this happens, we leave ourselves open to competitors. These competitors look at your customers the same way you did when you sold to them. Treat your established customers as new ones or someone else will. Treat them as you would like to be treated.

In general, a dangerous decrease in customer satisfaction could be predicated on a change in one of many circumstances. The following are some incidents that can create this type of situation:

• Change in customary communications (frequency or tone).

• Changes in people (staff on either side).

• Changes in the economy.

When dissatisfied customers are discovered, the situation must be dealt with quickly.

Phase One—Diagnostic Exam

Find out as early as possible: (a) why the customer feels compelled to go to bid; (b) what his goals are for the bid process, and; (c) what can you do to help. Identify influencers (what is important to him) and respond quickly.

Phase Two—Create a Team Strategy (based on “give and get” and using the following considerations)

• Reclarify the customer’s important issues before you begin.

• Establish quarterly review metrics to remind the customer of what you have been doing as well as your consistent superior performance.

• Determine what is meaningful to “give” in order to keep business.

Phase Three—Execute Against This Plan

• Execute, execute and execute.

• Measure.

• Make changes.

A downturn in the economy does not have to mean a downturn for your business. Never take a customer for granted. It is up to you to be mindful and watch for changes. The cheapest new sale is keeping a current valued customer. Monitor the pulse now of all customers.

Sometimes we think it’s just bad luck to lose a customer, but I agree with Thomas Jefferson, who said, “I’m a great believer in luck, and I find the harder I work, the more I have of it.”

Barney Gershen is president of Gershen Consulting, LLC in Bellaire, TX, and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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