In The Revenue is in the Relationship, we found that:
- Acquiring a new customer is 5-7x as expensive as retaining an existing customer.
- The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.
- Increasing customer retention rates by 5% can increase profits by 25-95%.
Customer retention was most driven by:
- 89% of businesses report their customers state that their user experience is the key factor in their loyalty.
The user experience is essentially customer service, how we serve the customer (continually).
What’s the riskiest assumption in all of this?
If you believe you’ve done a great job getting your customer funded on the first go around, then customer retention will follow and naturally take care of itself.
Or maybe your customers will just leave.
Because if you stop deliberately trying, maybe your customers will start feeling that you no longer care about them or their business, maybe they are just a transaction.
Why do customers leave?
According to recent survey in 2019 by Strategic Insights, customers leave by these accounts:
1% – Customer dies
3% – Customer leaves market
5% – Customer gets friend to provide service
9% – Customer persuaded to go to competitor
14% – Customer is dissatisfied with your service
68% – Customer believes you don’t care about them or their business (you only care about yourself)
So 32% of these you can’t control, but at least 68% you can, right?
Let’s really look at this a level deeper.
Customer dies: RIP and all the best to their family, but you can’t control or influence that.
Customer leaves market: very little control or influence over that.
Customer gets friend to provide service: losing business to customers’ friends happens (there’s more rapport and trust there).
Customer persuaded to go to competitor: within our control and influence (this is a failure on our part).
Customer is dissatisfied: same, see above.
You add that in with on top of all of that the customer believing you don’t care about them, it’s not 68% within our control/influence – its 91%!!
That’s great news, but the reality is that there is this huge 91% risk that your customer may end up dissatisfied with your service, feel like they’re just a transaction and believe you don’t care about them or their business, then get persuaded to go to a competitor, which they are even more dissatisfied with, leaving them no other choice to muster up the courage to ask one of their friends for the funding and leave the market altogether, ending up so heartbroken after all of this that they drop dead!
We can’t let this happen. 91%.
What’s the opposite of all of this described above?
The customer is satisfied with your service and believes you care about them (you are aligned with their interests and business goals).
What is the best way to achieve this?