New Clients Are Great, but Existing Clients Are the Key to Revenue Growth
Focusing on customer acquisition over customer retention is like throwing a party and making beautiful, edible, perfumed invitations but then forgetting to buy any refreshments or snacks for guests to enjoy at the main event.
After acquisition, your customers are most inclined to jump ship if you fail to impress. This is when their expectations are either met, surpassed, or destroyed.
Customer retention seems like such an obvious business goal, so why do so many companies tend to neglect it?
There seems to be a widespread and ingrained belief that it’s the chase that matters. In fact, 44 percent of companies say they devote most of their attention to customer acquisition, compared to just 18 percent that focus on retention. This attitude penetrates all levels and departments of the typical business. Salespeople are incentivized for acquisition, for instance, and all-hands meetings celebrate acquisition metrics as opposed to accounts retained and customers renewed.
According to Bain & Company, retaining an existing customer is six to seven times cheaper than acquiring a new one. And these existing customers are also far more lucrative — there’s around a 60-70 percent likelihood that they’ll purchase again from you, according to research by Marketing Metrics. Compare that to the measly 5-20 percent likelihood that a new prospect will buy at all.
The First 100 Days of a customer’s life cycle are vital because customers’ impressions are formed during this time. If you can delight your customer for at least 100 days, I’ve found that you’ll gain their loyalty for at least five years. Five years!
Here’s your guide to seizing those crucial First 100 Days:
1. Overhaul and Extend Your Onboarding Flow
Onboarding is a precise system you design to roll out the welcome mat for new customers. But onboarding is also vital for retention. If you teach your customers about your processes, encourage them to ask questions, and reward them for following your systems, they’ll be more likely to make the most of your product or service.
How can you extend the welcome mat throughout those First 100 Days of your customers’ life cycle? Maybe it means sending “just because” emails with an article about a topic you know they like. Or perhaps it means checking in with your users when product features are updated so you know they’re making the most of these new capabilities. Determine what onboarding means for your business, make sure all employees understand the process, and keep it consistent throughout the customer journey.
2. Actively Invest in Retention
Make customer retention a priority — not an afterthought — by investing time, money, and energy into your overall customer experience.
For Zappos, that means sending “wow gifts“ to customers. It’s an inexpensive strategy — basically, employees are allowed to treat customers to a bouquet of flowers or a box of cookies at their discretion. At the Zappos office, there’s a hand-drawn stat board showing how many “wow gifts” have been sent out that quarter. As Zappos team members say, it’s not about the gifts themselves, it’s about the act of friendship that connects that customer to your company in a deep, meaningful way.
3. Give Employees a Great Experience, Too
Flowers, cookies, and acts of friendship shouldn’t just be reserved for your customers and clients. How can your employees deliver first-class experiences if they’ve never experienced first class themselves? While they’re sitting in a cold office waiting for their lunch break, they’re trying to shower customers with joy and delight across the phone line or via the email inbox. It’s a tall order, to say the least.
Treat your employees (even those who’ve been with you for years) to a VIP, all-expenses-paid “experience” of your product and service offerings. Allow them to understand what the ideal experience feels like so they can deliver it to your customers.
4. Celebrate Retention
From tweeting a fireworks GIF to celebrate reaching 1,000 followers to awarding bonuses for acquisition milestones, most celebrations focus on new customers. It’s amazing how infrequently companies celebrate their existing customers.
In these pivotal First 100 Days, celebrate retained clients with the same level of enthusiasm that you celebrate newly acquired clients. Do you ring a bell when a new client joins? Why don’t you ring a bell when an old client renews? Do salespeople get a free trip to Napa for exceeding their quota of new clients? If so, why aren’t you sending your retention team on celebratory trips for retaining customers?
Focusing more on retention has clear results. Customers who feel appreciated and excited will be quick to repeat their business with you. According to the Pareto principle (aka the “80-20 rule“), 80 percent of revenue comes from 20 percent of your current customers. Not only will current customers be more likely to buy from you, but they’ll also be more inclined to mention your name to their friends.
Perhaps the most important benefit is the influence this change in attitude will have on your employees. They’ll be doing more than just making sales and boosting the bottom line — they’ll be creating memorable moments for your customers.
Have you read?
Joey Coleman’s book Never Lose a Customer Again.