Steady as we grow
Choppy waters ahead for consumers and businesses. That’s the common expectation for the coming months.
It’s inevitable that a higher proportion of household budgets will go on essential services as costs rise – primarily energy and food. As belts get tightened discretionary spend in many sectors that sustain the enjoyment of life – retail, hospitality, travel, leisure – get pressured. Add in the fact that employment is high and moving jobs more common, the Great Resignation, and you get a significant challenge to budgets and bottom-lines. How to maintain a market presence and relevance to customers?
The reality is obviously different for different sectors. However, one thing universally understood is that the costs of customer acquisition outweigh those of retention. Loyalty pays. In more ways than are normally understood. So, when the waters get choppy it makes sense to look internally and better understand the dynamics, nature, and profile of the existing customer base. The economics are a bit of a no-brainer and go beyond simple transactional history. Frederick Reichheld’s* book, The Loyalty Effect shows:
More loyal customers are served at a lower operational cost
Customers who have a long-term relationship are more efficient users of products and services
The holy grail of marketing - word-of-mouth referrals increase with time
There is less price sensitivity in long-term customers who place a higher value on brand, product, and service
The findings from research undertaken by Reichheld’s employer, Bain & Company, across many sectors show a relatively small 5% rise in the rate of customer retention increases the overall lifetime contribution per customer with a 25-95% rise in profits - depending on sector.
“It’s not enough to reward your customers with good service. You have to make them aware of the good deal that they’re getting for doing business with you—and keep reminding them of that in many subtle, different ways.”
Michael LeBoeuf, How to Win Customers & Keep Them for Life
It’s no great secret that reducing customer churn and increasing retention pays rich dividends. Every business should have a customer first mindset. How deep this runs and how central to the company’s values and operation it is no doubt varies widely. What is common sense though, is that when the waters get stormy the priority is to stabilise the ship. The same is true in business.
Every brand and business can benefit from a re-evaluation of their customer relationships, metrics, and journeys. Looking to gain greater insight into segment behaviour, tuning listening skills, and engaging the whole business in a revised retention strategy. All ways to stabilise and succeed in the swirling currents of current economic conditions. How this is done is determined by existing practice, resources, and culture. What can be done to accelerate insight and understanding is to increase engagement. Any customer retention strategy can be positively impacted through the tactical use of customer incentives and customer delight interventions.
Customers are People: Do the Right Thing
And because customers are people, they value and remember how you make them feel. Do the right thing and they’ll respond likewise. Consider. If word-of-mouth referrals increase as relationships lengthen then increasing loyalty also raises customer acquisition in the most cost-effective way. That’s why understanding, influencing, and rewarding current customers has never been so important.
From a simple ‘welcome’ or ‘thank you’ to rewarding upsell and cross sell behaviour; raising engagement online or in apps; increasing subscriptions and referrals; rewarding feedback. At Lock-in Marketing we have decades of experience working with clients to improve retention and delight customers through low-cost, bespoke, targeted rewards, benefits, and experiences.