The typical company will focus on growth by emphasizing customer acquisition. However, market share growth is highly dependent on been able to retain customers. In that area, all that is needed is to find the source or the reason why they defect and then slow the rate of that defection. I doubt that you will ever get to a point where you will never lose a customer nor should that even be your goal. But what you should do is it elevate the importance of customer retention to a level of equality to customer acquisition.
Dr. Eric Reidenbach has been a favorite author, mentor and collaborator with me through recent years. We developed the info-program Driving Market Share where we spent a great deal of time discussing his favorite past time, the subject of value. During that time we created this assessment on Customer Retention. At the bottom of the post is a quick overview of your answers.
Customer Retention Assessment:
Q1. What percentage of customers do you lose, on average, in a given year?
____% Don’t know ____
Q2. Do you have a program or system for managing customer retention?
Yes ____ No ____ Don’t know ____
Q3. Do you have a method or system for identifying systemic breakdowns in customer service?
Yes ____ No ____ Don’t know ____
Q4. Can you measure the dollar cost of a lost customer?
Yes ____ No ____ Don’t know ____
Q5. Do you do any lost customer analysis?
Yes ____ No ____ Don’t know ____
Q6. Have your quality initiatives focused on any customer loyalty or retention projects?
Yes ____ No ____ Don’t know ____
Last week Dr. Reidenbach gave me the honor of posting his latest article which I divided into two blog post:
- Building Value into the New Product Development Process
- Capitalize on the Speed of Value to Insure New Product Success
About Dr. Eric Reidenbach. He is the Director of the Six Sigma Marketing Institute and the author of over 20 books on marketing and market research. A few of them are listed below.
- Best in Market: The new Imperative for U.S. Manufacturing (Immediate Download)
- Listening to the Voice of the Market: How to Increase Market Share and Satisfy Current Customers
- Six Sigma Marketing: From Cutting Costs to Growing Market Share
- Value-Driven Channel Strategy: Extending the Lean Approach
Assessment Overview:
Churners are those companies that answer “no” or “don’t know” to the questions are companies that tend to be complacent about customer care and customer loyalty. This response pattern suggests that there is no one or no function within the company that is focused on keeping customers. They are companies that are probably losing significant amounts of revenue by ignoring their own customers’ needs.
The costs of customer acquisition runs about 5 times the cost of customer retention and this can have a significant negative impact on profitability.
Retainers are those companies that have provided a “sticky” environment that keeps customers and enjoys the annuity effect of loyal customers. These companies know what their churn rate is (Q1) and have deployed an active program to promote loyal customers.
More advanced retainers will actively seek out information regarding what they are not doing but should be doing. They may undertake a lost customer analysis (Q5) and use this information in their quality programs (Q6) and to improve any systemic weaknesses (Q3). These companies understand that market share is comprised not only of customer acquisition but also customer retention.
More about customer retention during the week.