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Six Key Factors in Customer Retention
By Paul Fileman

Here are some statistics that should get your attention:

  • The average unhappy customer will tell 8 to 16 people about it. Hundreds (even thousands) more if they publish their experience on a social networking site.
  • More than 90% of unhappy customers will never purchase service from you again.
  • It costs 5 times more to attract a new customer than to keep a current one.
  • If you make a real and sincere effort to remedy customer’s complaints, more than 80% of them will stay with you.

Six Factors

1) Value

  • Offer good value wherever possible, if customers believe they are getting a good deal they will be much more likely to buy from you again. Some businesses try to charge extortionate prices to customers, this brings extra money at the time; but in the long run, customers will have no loyalty to them, and eventually they will have no customers at all.
  • Make sure that your customers feel they have got their money’s worth – while being sure to price things at a sustainable level (apart from on special offers).

2) Consistency

  • Be sure to remember why your customers came to you in the first place.
  • What was it about your business that attracted them? You need to be sure that while you change in order to attract new customers, you do not alienate your older customers. A good example of this mistake is Marks and Spencer. When M&S changed its clothing lines in order to attract a younger clientele, loyal customers were upset and took their business elsewhere because they no longer felt like they were shopping at the store that they had come to know.

3) Communication

  • Be sure that you let your current customers know that you appreciate their business and that you want to keep their business. Think in terms of offering special discounts and sales to your loyal customers and let them know what is going on with your company and what your new products and services are.

4) Sincerity

  • When you construct special offers for existing customers – be sincere. Make sure that the offer really is for their benefit and does not disguise some hidden agenda. A local car dealer wrote to me to tell me that they had gained a new service accreditation – and gave me some fancy name for this. They offered me a free health check on my car. A quick look on Google for the name of their new accreditation found a software vendor claiming massive up-sell / cross sell benefits for car dealers. It was a thinly disguised ruse to get my car in their workshop and then bill me for a load of stuff I probably did not need.

5) Relationship

  • One of the key reason customers become loyal is their relationship with the employees of the business, sales and customer service staff especially. Friendly staff make customers feel valued, and if the quality of service is also good, customers feel a personal tie to the shop.
  • The ability to form friendly working relationships with your customers is one of the biggest advantages small businesses have in the marketplace. Greeting customers politely (with their name if you know it) can make them feel appreciated - just one minute talking to each person is all it takes to get the ball rolling.

6) Trust

  • It may seem obvious, but by far the most effective way to make customers loyal is to treat them well. Provide a good product or service at a reasonable cost, provide friendly customer service at all times, and deal with complaints as quickly and effectively as possible. Be honest, and give the customer reason to trust you. Loyalty rarely exists without trust.

Next Steps

Talk to your customers and ask them what they want. Mingle with them as they are shopping in your store and see what attracts them to certain products. When next you meet a client, ask them open questions about how they feel about one of the six factors above in your case. Get to know your customers. Ideally so that they feel like they have a friend who happens to provide particular products and services.
 

Added: 10th December 2010

Paul Fileman is a business results improvement professional, marketer & mentor. He works with businesses to improve their profitability and performance. Find out more about Paul's company Results Zone.

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