Do you tend to switch from Flipkart to Amazon to get a better deal on a product?
Do you explore all the available sellers before choosing one?
Did you switch to Reliance Jio from Vodafone just because it was providing cheaper and superior Internet service and also plan to switch back to Vodafone as soon as Jio stops providing free services?
I am sure most of you would have answered a “YES” to the above questions. This has been one of the most troubling customer behavior for a majority of organizations all over the globe. Let us check out some facts and figures:
- Acquiring new customers can cost five times more than satisfying and retaining current customers (Alan E. Webber, “B2B Customer Experience Priorities In An Economic Downturn: Key Customer Usability Initiatives In A Soft Economy,” Forrester Research, February 19, 2008)
- 2% increase in customer retention has the same effect on profits as cutting costs by 10 percent
- The average company loses 10% of its customers each year
- 5% reduction in customer defection rate can increase profits by 25-125%, depending on the industry
- The customer profitability rate tends to increase over the life of a retained customer (2002 Emmett C. Murphy and Mark A. Murphy, Leading on the Edge of Chaos, Prentice Hall 2002)
This is how critical customer retention is – By definition customer retention is the activity a company undertakes to prevent customers from defecting to alternative companies. Successful customer retention starts with the first contact and continues throughout the entire lifetime of the relationship.
Before we move onto the strategies to improve customer retention, we need to first find out why is customer loyalty decreasing:
- Lack of innovation: Brands like Nokia which were market leaders in mobile phone segment are nowhere seen in the smartphone segment as they ceased to innovate. On the other hand, Apple enjoys enormous customer loyalty, only because Apple has gone unconventional and innovative.
- Poor quality/service: Customers have some perceived value for the products or services they pay for, if that is not met, they will not return.
- Competition: Due to increasing globalization, any organization will have to compete with global brands. Also, customers have a plethora of options to choose from.
- New experiences: Customers are like to experiment. Brands failing to engage the customer no longer enjoy their attention
There is no single strategy which works for all the brands. However, there are a few things that organizations can follow:
- Set expectations and meet them: Tell the customer what are the benefits of the product and what kind of service will you be providing. Once that is done, make sure you deliver it.
- Reminders: Keep the customers updated about your products, offers, discounts, etc. via emails, text messages, social media, etc.
- Feedback: Be open to suggestions and handle criticisms politely. Accept the fact that customer is the king.
- Customer oriented practices: Align your organization’s activities keeping the customer at the center. Amazon has mastered the art of customer-centric approach.
- Loyalty programs: Give cashback options and discounts on repeat purchases.
- Walk the extra mile: Customers are attracted to brands that will go beyond limits to fulfill their expectations.
- Proactive support: Bookmyshow sends reminders to the customers an hour before a movie is going to begin. Small deed but impressive!
There a number of methods to improve customer retention, however, they are more or less a subset of the above points. I would like to conclude by quoting Albert Einstein-
“Strive not to be a success, but rather to be of value.”