Many businesses tend to spend much of their time and money acquiring new customers. In that process, they often overlook their best source of growth, which is not in attracting new customers but rather in retaining and growing their existing customer base. When businesses are searching for ways to improve their bottom line they would do well to focus their energy on customer retention. It costs a lot less to keep a customer or get a new customer by word-of-mouth than it is to win a new customer. Case in point. A business whose model is based on monthly recurring sales (such as the cell phone, cable or insurance industries) found that historically their customers stayed an average of two-and-a-half years. Meanwhile, the customer acquisition cost for that business to just breakeven was nearly two years. If that business were to retain all of its customers by just one additional month on average, it would achieve an additional 3% of annual growth. If it retained its customer base for four additional months, it would create double-digit growth…. without adding a single customer. Clearly, keeping a customer even a little longer would be much better for that business than landing a new customer. That is true for most businesses.

If customer retention is the key to a better bottom line, what does it take to keep customers happy? Loyal? Some think that delivering a good product or service on time at a good price should suffice. Think again. Competition being what it is, delivering a good product or service on time at a good price is just the beginning. It takes more than that to keep a customer long-term. On the other hand, where companies go wrong is in thinking that it takes grand gestures and big efforts to retain customers. Actually, research shows that often it’s the littlest things that have the biggest impact. The key is to focus on the little things. Continue reading →