You’ve read the startling statistic that is recited with astonishing frequency and variability:
“It will cost your company “6 times less” or “10 times less” to keep an existing customer on the books than to acquire a new one.
We might quibble with the precise numbers, but it would appear to be a bedrock truth that saving customers, or more to the point, not losing them, is worthwhile.
By itself, that is a valid statement. Why lose business, unless it is bad business, but that we’ll save for another discussion.
When customer retention initiatives are pitted against marketing and selling, trying to add accounts to the books, I start to squirm. Especially in a poor economy such as ours, given a choice, it would be a major mistake to redirect resources from customer ACQUISITION to customer RETENTION, which is really what the startling statistic implies.
In a dire economy customers and clients will leave the fold for reasons that have nothing to do with factors you control. Their own business models may be under pressure, or suddenly become obsolete.
For example, let’s say you sell exercise equipment to gyms, which in turn sell memberships on a subscription basis. As long as memberships are increasing, there are available funds to support entering sales contracts for your stair climbers and resistance devices.
But when that membership pace slows, the payback on investment looks prohibitively remote, so you can’t sell the machines nearly as easily, if at all.
Catering to consumer skittishness, gyms begin to offer “no contract” memberships, and suddenly they look to you to lease or to rent your machines on an equally short-term basis.
If the trend continues, more gyms will be shuttered, and fewer start-ups will replace them. Your business will be in dire straits, unless you can ENLARGE THE MARKET for your exercise platforms.
That involves marketing and selling, perhaps directly to corporations; at least to potential buyers that have never appeared on your radar before. Comparatively, every dollar you throw after the declining gym sector in an effort to retain your customers, is wasted.
Don’t get me wrong. I have been selling customer satisfaction programs for years, and I am a complete zealot when it comes to treating your current supporters, well.
However, if they are an endangered species, on a short path to extinction, you need to find a suitable substitution, and fast.
Treating them luxuriously will not create any more where they came from.
This is one of the sad truths that explains why customer service staffs are cut back mercilessly in economic downturns. Service personnel are wonderful at supporting yesterday, but out of their depth in creating tomorrow’s profits.
But it is foolish to let their experience and customer sensitivity vanish.
Retraining non-salespeople to sell isn’t always successful, but it is worth the effort and resources. After all, they know your company and product inside-out, they don’t have to be recruited, and you can focus on the one skill everyone needs to put to work: selling.