While this sounds like a simple question, it should provoke several thoughts that will help you get your arms around this concept, which is critical to the long-term growth of a business.
Let’s start with Wikipedia. It defines customer retention as the activity a company undertakes to reduce defections. Sounds good, except that it is not an activity; it is activities. And the objective is not just to keep the customer but to have the customer want to continue doing business with your company and promote your company anytime she has an opportunity.
For example, signing a customer to a five-year contract, then bragging about how no one ever broke the contract, then delivering minimal value, which leaves the customer disgusted but locked in (i.e., retained), is not a good outcome. Handcuffing a customer is a lousy retention strategy since they will make it their business to tell as many people as they know or come into contact with (think Twitter and Facebook) – you may win the battle, but you will lose the war.
This means retention is closely aligned with loyalty; both focus on excited customers who will continue to do business with you and tell others. The difference is that belief is about intent (likely to recommend), and retention is about action (purchase again and actually recommend).
Loyalty is about maybe; retention about does!
As you look forward to growing your business, you must prioritize customer retention and have a KPI (key performance indicator) measuring the % of customers defecting (churn). The % of revenue coming from existing customers. Check over time and benchmark against like businesses to ensure you are not driving your customers away. To read more about the topic, continue here>>
And remember that without customer retention, you have an uphill battle to grow your business – new customers must be acquired solely to replace those that depart.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create and manage a retention strategy, please contact us or check out some of our free articles and white papers here.