Get Ahead of the Recession by Retaining Your Customers
Posted: Tuesday, September 29, 2009
by Laura Walker
Universal Funding Corporation
With so much recession-fighting advice out there, it's easy to get confused about which strategies will actually benefit your business and which could be fatal mistakes. The disruption in the economy is hurting most businesses, so it's natural to seek out suggestions that might give you an advantage over the competition, so carefully consider which ideas actually apply to your business model. One strategy to help any business survive and grow during this recession is a focus on improving your customer retention practices.
From whatever angle you choose to target your reform efforts, don't lose sight of the customers you already have. A natural reaction to this recession is to cut costs, which is what your customers are doing too. They are probably not averse to finding a better price elsewhere, especially if you're not paying close enough attention to them. At this critical time, you must not only keep an eye on what the competition is doing, but you need to upgrade your customer service agenda as well.
Your staff must be on board for these improvement measures to take hold and stick long-term. Hold regular meetings that involve review of the day-to-day interactions with customers, emphasizing the positives and discussing how the negatives can be turned around. Show your employees that you care about them as much as you care about your customers. Customer retention is directly related to employee retention, so staff must be involved at every level of this process. You need them just as much as you need your customers.
Perform a gap analysis on your customer service program in order to compare your actual performance to your potential performance. You can make this analysis as in-depth as you want, but the basis should be in the questions: "Where are we now?" and "Where do we want to be?" One way to figure out where you stand now in terms of customer retention is to take a look at what percentage of new customers return for repurchases and how long each of your regular customers has been a repeat buyer. Are these figures where you want them to be?
A very useful assessment tool is offered through SalesForce.com called Forrester's Customer Service Innovation Framework and Self-Assessment. This free guide can help you find out how your company's processes compare to 150 customer service best practices.
One way to nourish your customer relationships as a manager or business owner is to make personal contact with each one and find out how they're doing. Because you may not know they're shopping for a better deal until it's too late, make the first contact. Let them know that they're important to you and your goal is to keep their business. Listen to your customers' pain and write it down, so that you can find a way to help them while helping yourself in the process.
Conduct a survey and collect as much information as possible, particularly each customer's regular purchasing days. You'll get a clue that something is wrong if they don't order at their usual time and you may be able to work something out before they commit to your competitor. Email a link or send a hard copy of the survey along with your product or service and make sure you allow for anonymity so that the answers will be as candid and useful as possible. Give this survey to each of your employees as well and ask them to fill it out as if they were a customer.
Don't be afraid to ask your customers what other vendors are doing to retain their existing clientele. Customers are likely to tell you what keeps them coming back to a business, especially if they can see that you are open to suggestions. The more you listen to your customer, the more you will learn about how to fulfill their needs and keep their business indefinitely.
Sometimes it takes an adjustment in the way you do business to keep your customers as regulars. An offer of extended payment terms to credit-worthy customers might be what it takes to cement their loyalty to your business. During this recession with credit as tight as it is, this offer can be a life-saver to companies that may be experiencing gaps in their cash flow. But before you do this, make sure that carrying those invoices on you're A/R won't put your business in jeopardy.
Offering credit terms is a very valuable customer retention practice, but it can be risky if you don't perform your due diligence first. An accounts receivable factoring company can help alleviate some of this risk as well as pay you for that invoice right away, so that offering longer payment terms to your customers won't slow your cash flow. A factor can advance you immediate cash on invoices that are payable in up to 90 days. As a rule, factoring companies will thoroughly check out your customers' credit before purchasing and collecting on their invoices, so ask your factor to check credit before you decide to offer terms to a new or existing customer in the first place.
If you risk losing your customer because of their tight budget, repackaging your product or service might be a good way to keep their business as well as attract new customers. An example of this smart move is Sunrise Software, which repackaged its ITIL based software and training program in order to cater to recession affected companies. The promotion emphasizes the benefits of upgrading while adhering to a recession-adjusted budget.
Value-added services can be extra perks at no additional cost or part of a package deal that involve discounts based upon a combination of services. If you can afford to add something to your product or service to provide a more comprehensive bundle, it may be what keeps a customer from turning to the competition. Providing a written comparison between your product/service and your competitors' can also be a good strategy to prove the value and benefits that your customer is receiving by staying with you.
A suggestion by bMighty.com's Jennifer Moline (February 26, 2009 blog post: "Crisis Survival Kit: 12 Tips To Keep Customers Coming Back") is to "seek out and cultivate lagniappe moments. Lagniappe (lan-yap) is New Orleans-speak for a little extra.'" This type of gratuity given to your customer is traditional in southern Louisiana and Mississippi and is an easy way to say "thank you" during the current economic crisis.
The power of saying "thank you" is often lost in the casual way we toss around the phrase. Everyone says it, even when we don't mean it, yet it's a powerful customer retention tool. One way to show your customers that you really mean it is to write them a letter or email acknowledging their importance to your business and thanking them for their patronage.
As evidence of your appreciation to your most loyal customers, offer a discount or incentive to encourage larger or more frequent orders and referrals. You may also take the opportunity to propose a trade of services with your most loyal customers in order to mitigate costs and work together through hard times. Is there a way for you to partner with those customers in your marketing efforts by distributing each other's coupons or holding a promotional event together? Mutually endorsing one another's business is not only marketing gold, but a demonstration of reciprocal loyalty.
There are many ways to strengthen your customer relationships to the point that they would never consider going to your competitors. Nurturing that relationship will naturally encourage your customer to help build your reputation. To encourage this type of branding, you could offer referral incentives to customers who send new business your way. The best prospective customer is usually the one who has been referred by word-of-mouth, but you definitely won't be getting that kind of a favor from customers who aren't pleased with your service.
Author and marketing expert Seth Godin suggests in his July 23, 2009 blog post "Welcome to island marketing," that every business must act as if it were on an island where everyone knows one another so that "every interaction matters and every customer is precious." Customer service is the most important part of your marketing efforts because everything you do sends a message about your business and can affect the occurrence of repurchases as well as word-of-mouth, both good and bad.
Godin says that you can no longer burn through the market in this age of global communities, which are knitted together through online social media. The new word-of-mouth is called viral marketing and it spreads fast and far. One little digital message is all it takes for your name to become a hashtag in this small world. Twitter, Facebook, LinkedIn, and other social networking sites have made the world an island that you can be exiled from if you're not careful. Case in point: the Twitter post by a former tenant that inspired Horizon Realty to sue her for libel to the tune of $50,000 (Chicago Sun Times, July 28, 2009, "Tweet about apartment mold draws lawsuit" by Lisa Donovan).
Although the post originally went to only 20 followers, that audience is much, much bigger now. When a journalist asked if Horizon had spoken with the tenant about the post or asked her to take it down, the company's representative said, "We're a sue first, ask questions later kind of an organization." Well, I don't need to tell you what just happened to my opinion of that company.
Customer service by way of social media can be an excellent way to reach out to your customers. The July 31, 2009 article "Twenty-One Top Twitter Tips" by Daniel Adler in Forbes Magazine tells how "Frank Eliason, director of digital care at Comcast, uses Twitter to help 200 to 300 subscribers a day with issues ranging from sporadic Internet service to errant e-mails. Frank and his team receive direct questions at the @comcastcares account and search for complaints." Addressing issues as soon as they come up in this public forum offers other customers the opportunity to have their questions answered just by reading Comcast's tweets.
Reaching out to your customers and integrating their feedback into your customer retention policy will help your company be a better business all around. So, if you can't reduce prices or repackage your products and services, you may be able to keep your customers by the strength of your relationship.
The recession has made innovation a must and businesses that don't make changes will not make it to recovery.
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Top-level comments on this article: (2 total)Good advice, Laura. Some businesses are thriving, even in this recession. Welcome to SearchWarp.Thanks, Lorrie. Glad to be part of SearchWarp. I look forward to getting acquainted with other writers here.
This was great advice. I like that fact that the focus of the article is about the customer. To often businesses lose sight of the fact they they are in business because of their customers and don't focus on the importance of adding value to their customers. Keeping your customer doesn't cost a cent but trying to get new customers is way more costly. Looking forward to receiving more business advice from your articles.
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