Article -> Customer Retention Needs to be a Top Priority
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Date Added: May 2005
The March 28 issue of The Business News discussed results from the Business Pulse survey taken during Quarter 4 of 2004. Among business priorities, growth and profitability overwhelming was the top priority with 41 percent of the responses, while customer relations was a distant sixth, with only 9 percent of the responses.
This differs from The Conference Board’s annual survey of the top 10 CEO challenges. While growth and profitability ranked No. 1; a close No. 2, not a distant sixth, was customer retention and loyalty. These results appear to show misalignment between CEOs across the country and those in Northeastern Wisconsin.
Call it customer relations or customer retention, the discrepancy is worth discussing because growth and profitability, and customer relations are very much related. It’s troubling that Business Pulse respondents may not be seeing the connection or believe they’re already doing customer relations well.
Can growth and profitability be achieved without focusing on customer retention and loyalty? If so, can it be sustained? Research continuously supports the following:
- Loyal customers drive revenue growth up to 20 percent.
- Up to 95 percent of profits come from long-term customers.
- Adding a new customer costs three to seven times more than keeping a current one.
- As much as 80 percent of successful customer strategies come from insights into customer behavior.
If your organization lacks the information and a strategy to attain customer loyalty, achieving growth and profitability becomes exponentially difficult. Accomplishing this requires linkage across your entire value chain – externally with your customers, and internally with your employees.
You must gain information about customers’ needs. Most organizations say they already do this; however, when pressed, the answers become vague.
Answers range from: “Sales gets this information,” “we conduct a customer satisfaction survey,” or “I personally talk to customers once a year.” Does Sales communicate customers’ areas of opportunity, along with positive information? Isn’t a customer satisfaction survey reactive, conducted after business has been completed, versus proactively identifying customer needs? Is speaking to customers once a year enough, or do their needs change more often?
As many as 96 percent of unhappy customers will never complain to you. They will complain to someone else. You must proactively ask for the voice of the customer – often with assistance from an independent source – and create a customer-centric strategy to act upon it.
This alone will not lead to increased customer retention, and growth and profitability. There must be alignment with employees throughout your organization. CEOs from the Business Pulse survey taken during Quarter 1 of 2005 (April 11, The Business News) stated some of their most significant challenges as recruiting and motivating employees, growing business, communicating, and planning.
Organizations must recruit the right people in the right roles, and focus on developing them as leaders with differentiated service excellence skills. This isn’t just for Sales; it’s for departments such as marketing, human resources, engineering, operations, and all others.
Growth happens through people. Your people must design and manufacture quality products. They must effectively market and sell these products. And they must effectively service customers. Without people, organizations have no growth and profitability.
Linkage through a performance measurement system from employees to departments to customers can provide this alignment. This would include financial and non-financial measures, as both are vital to employee engagement, which leads to increased customer loyalty, resulting in the growth and profitability desired by all leaders.
More than 2,300 years ago, in The Art of War, Sun Tzu wrote: The individualist without strategy who takes opponents lightly will inevitably become the captive to others.
We all want growth and profitability. Without a business strategy aligned with an organizational performance management system, linked to a customer retention and loyalty strategy, you will become captive to your competitors as they will steal your employees and customers. If you and your competitors both have these strategies, ensure that yours is executed in a superior manner to maintain your competitive advantage – and most importantly – your employees and customers.