It’s common knowledge that it takes more money and resources to attract a new customer than it does to keep an existing one – up to five times more, according to Lee Resource, Inc. Not only does it cost more in direct sales and marketing efforts, but also in long-term revenue loss. In an article by Matrix Partners VC David Skok, the CEO of Totango, Guy Nirpaz, states that 70-95% of revenue for a SaaS business comes from the existing customer base. He also states that a moderate 2.5% churn rate can amount to a revenue loss of 30% annually. Trying to constantly make up for that lost revenue with new customers is a huge drag on company resources and diminishes future returns.
If you’re a business owner, entrepreneur, start-up founder, CEO, or any other person responsible for the growth and success of a business, you may be thinking, “How do we obtain more customers in 2014?” I propose you ponder a different question for the New Year: “How do we retain more customers in 2014?” Consider how to create loyalty and advocacy in your existing customer base in order to reduce churn, with this simple strategy: keep your customers happy.
“Customer Success” is rapidly gaining focus in organizations across many industries. Where Customer Support or Customer Service teams were once considered revenue-eating afterthoughts, Customer Success teams are finally earning the credit they deserve as long-term revenue drivers. The concept of satisfied customers as revenue-drivers isn’t new, however: according to a Bain and Co. study from 2000, a 5% increase in customer retention can increase a company’s profitability by 75%.
The concept of Customer Success involves a holistic approach, because nearly every department in a company impacts a customer’s experience. Proper alignment is needed along every touch point, from product development to sales to marketing to support. Every player on your team must share the same goal of delighting your customers at every turn. How is this accomplished? Ensure there is at least one person on your team solely dedicated to delivering a successful customer experience. Someone must live and breathe the concept of Customer Success and maintain a bird’s eye view to ensure the ball is never dropped along the customer’s journey.
Here are some ideas for improving your customer experience in 2014:
1. Improve employee engagement
It’s simple: happy employees create happy customers. Are your employees being recognized for their efforts? Are they empowered to creatively solve problems? When your employees feel like a valued member of your team, they’ll treat your customers like gold. Dilip Bhattacharjee, Bruce Jones and Francisco C. Ortega state it clearly in their recent HBR post, The Secret to Delighting Customers: “Creating great customer experience comes down to having great people and treating them well. They will feel more engaged with the company and more committed to its goals.”
2. Create functional feedback loops
When was the last time you asked your customers what they thought about your product or service? Or more importantly, when was the last time you acted on that feedback? Too often, the result of a customer survey or a complaint that trickles in via email gets lost in a reactive effort to repair that customer relationship. It’s crucial to ensure those complaints and feedback get all the way back to the drawing board. Implement functional feedback loops throughout your organization to make sure your team is building something that your customers actually want. You can start with something as simple as a weekly company-wide memo listing the top 10 complaints and compliments received from customers that week.
3. Review your marketing and sales strategies
Take a fresh look at what your brand is promising to your customers. Listen in on a sales call with one of your frontline sales superstars. What benefits and level of service are they promising? Are they realistically stating your value proposition? Is there a gap between what your marketing materials promise and what your team can actually deliver? Over-promising is a guaranteed way to disappoint a customer. Think about whether your business is living up to your brand across all customer touch points.
4. Figure out where the ball is getting dropped
Effective operations are the key to a consistent customer experience, but issues can go unnoticed in the flurry of day-to-day business. Perhaps your staff meetings are less than productive, with no process for holding team members accountable. Maybe you’ve been limping along for a year or more with a partially implemented CRM. Or maybe your programming team works in a different time zone, and they don’t feel like they are in the loop. These seemingly minor issues can significantly affect the customer experience. If you’re a leader in your company, you probably have a gut feeling that a ball is getting dropped somewhere. Start 2014 by identifying those issues and fixing them before the craziness of the year carries you away.
5. Reinforce your customer philosophy with your entire team
Launch the New Year with a clear statement of the customer experience you want to deliver -- because whatever your philosophy is, it will only work if everyone on your team is aware of it and on board. Perhaps your team doubled in size this year, or you had unexpected turnover in a few key positions. Either scenario can result in loss of focus and dilution of your company’s philosophies. Reinstating your customer philosophy at the beginning of the year will help ensure every employee is on the same page, which will in turn help create a successful experience for every customer along the way.
The New Year is an opportunity for us to try something new, repair something that is broken, or achieve whatever it is that we desire. As Carl Bard said, “Although no one can go back and make a brand new start, anyone can start from now and make a brand new ending.” Why not resolve to deliver a better customer experience in 2014?
How are you planning to improve your customer experience in the coming year? I’d love to hear from you in the comments below.