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Customer Retention: Different Approaches
Posted on April 16th 2013
Customer retention is a critical issue. Wisdom (and data, though it’s not at my fingertips) says that it costs us less to keep a good customer than to acquire a new customer. But it seems companies take two different approaches to customer retention.
It seems the alternative strategies center around “Keep them from leaving,” or “Let’s make them want to stay.” They sound the same, but they are really quite different – and produce very different outcomes.
Unfortunately, too many companies seem to adopt the “Keep them from leaving” approach. The mentality underlying that approach isn’t concerned with customer experience, or even with customer satisfaction. It’s easy to recognize these organizations; they are the ones that ignore you until the contract is coming to an end, then all of a sudden they’re your best friend. When you suggest that you may want to change suppliers, all of a sudden there’s a pricing adjustment: “We found a way to save you money,” “We can discount these additional things if you stay with us.”
Somehow, all of a sudden, we have become “valued customers,” though we never knew it or felt it before.
They are the organizations that make it difficult to change. Either through very complex contracts (particularly at termination), punitive terms, or who technically or logistically make the change very difficult. There are those relationships – we all have them – where we really aren’t happy with our current suppliers, but the hassle and costs of changing are so large, we continue the relationship. These relationships are not based on satisfaction, value, or excitement, but out of minimizing hassle.
We do as little business as possible with those suppliers. When we do, we do everything we can to get the very cheapest price. We don’t “cross-buy or up-buy,” because we don’t like the current experience. Yet those suppliers continue to invest – albeit perhaps minimally, but they still annoy us, trying to get us to buy more.
Then there are those that take a different approach to customer retention. They create products and experiences that keep you coming back. They discover problems before you know you have a problem, and let you know. They call you up, saying, “We’ve been analyzing your account, you can save a little money if you did these things.”
Their contracts and terms of business aren’t punitive. They realize all the “legalese” will keep a customer if they are truly unhappy and that punitive terms are not a customer retention strategy. They realize customer retention is all about creating experiences that make the customer want to stay. They create experiences that make the customer want to buy more because they want to, not because there is no other alternative. We are tremendously loyal to these companies, often buying without looking at alternatives, because we enjoy the company and their products so much.
Finally, these organizations always make sure the customer knows how much their business is appreciated – every day and in every exchange. It’s clear they care, not just about our business and what we spend, but about our relationship.
These two approaches also create another set of behaviors that are very different. I become an evangelist, a promoter, an unpaid sales person for those companies that focus on creating experiences that “make me want to stay.” I refer people to them, I advocate their products and services.
For those that try to “keep me from leaving,” well… You can probably guess.
What’s your customer retention strategy?
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.
(image: customer relationship management / shutterstock)