Last week, my car insurance was due for renewal, so I phoned my current provider to see what price they could offer. I had looked around and found three companies offering better prices, but honestly, I wasn't bothered about switching if they would match my quote.
To my surprise, the rep I worked with showed very little interest in keeping me as a customer. He didn't attempt to match my quotes and couldn't offer me any compelling reasons to stay. When I got off the phone, I had made my mind up; I was moving to a new provider.
Most utility companies -- car insurance, cell phones, electricity -- make little effort to retain customers. Instead, they focus on acquiring new ones. While that may be fine for large companies, it's a poor business model for small- to medium-sized ones.
If you're a business owner, take a moment to consider this question: How often do you review your best customers and work out opportunities for growth?
If your answer is something like, "not often enough," or, "we don't have time," then read on to discover how customer retention can dramatically improve your business.
4 Roadblocks to Customer Retention
It costs five to 25X as much to acquire a new customer as it does to keep an existing one. I think we have all read a stat like this somewhere, so why don't businesses focus on developing their clients?
When I ask around, there are several reasons I hear:
We don't have the time; we're too busy delivering service to customers.
The service team doesn't have the skills or confidence to upsell.
We don't know how to identify new opportunities with existing clients.
It's not the service team's responsibility to acquire new customers.
Let's analyze these 'reasons' one at a time and explore how you can overcome them at your company.
1. You don't have time or you're too busy.
When you're mired in the day-to-day of working with customers, it can be hard to find time to nurture relationships with them. However, as we've already covered, it costs far more to win a new client compared to retaining an existing one. Regardless of demand, your team should be segmenting its time so that it provides normal support services as well as check-ins on your long-standing customers.
"Slow down to speed up" is one of my favorite business sayings and it's particularly relevant here. Paying adequate attention to your current customers will reduce the time and energy you spend prospecting for new ones. In the end, focusing on delighting customers as well as attracting new ones will save your team time.
2. Your team can't upsell existing customers.
If your team lacks confidence with cross-selling or upselling, you need to create a culture where all customer-facing staff actively looks for new opportunities. Identify gaps in your team's knowledge or skillset and adopt a program to train them. For example, we train our staff's technical skills -- how to design, how to write etc.-- however, we don't invest nearly as much in account handling, so we also work on our team's account management skills.
3. You can't find opportunities to engage with customers.
This problem is similar to the one above. Your team may be willing to upsell, but you can't find a good opportunity to do so. This all comes down to a shift in mindset. Put yourself in the customer's shoes and ask, "How could I add more value to their experience?"
This will help you understand customer needs and how your work contributes to their goals. Additionally, this approach will identify new engagement opportunities and produce initiatives that deliver customer success. Conducting a strategic review of your work will also open the conversation to future projects and additional offers.
4. It's not the service team's responsibility to acquire new customers.
If you're working in customer service, I have news for you. Acquiring new business from existing customers is your responsibility. Even if you're in a reactive support role, everyone in the company influences customer retention and acquisition.
For example, if a support rep provides excellent customer service that customer may tell a friend about your business. Not only does the rep retain a customer, but they also contribute to a new lead.
Now that we've removed these roadblocks from your business, the next step is to create an account development plan. Let's review what that function is in the next section.
What Is Account Development Planning?
Good customer service is the first step towards customer retention. However, it's not the only measure your business can take. I know when I ran my agency, we believed we could keep clients by going above and beyond. But, occasionally we would feel really cheated because we had worked extra hard for a client and suddenly they went elsewhere.
We could have prevented this churn with account development planning. Account development is a formalized structure for reviewing customer accounts, identifying threats and opportunities, and creating an action plan to upsell and cross-sell. This ensures that customer needs are met and your work is aligned with their short- and long-term goals.
If you're looking to adopt this system, you'll need to conduct an internal strategic review of your customer base. This process analyzes valuable customer accounts to make sure they're satisfied with your products and services.
Let's explore some best practices for conducting these reviews in the next section.
5 Best Practices for Conducting Strategic Reviews
1. Include relevant topics and data.
A strategic review should contain the most critical information needed to evaluate your customer relationships and future revenue opportunities. This includes:
Current and future revenue
Contact & relationship information for each client
A SWOT analysis
A strategic action plan to counter threats and take advantage of opportunities - with nominated leaders and deadlines
Centralizing this information will make it easier for you to analyze data and identify new areas to engage customers.
2. Conduct your review quarterly.
You should aim to complete a strategic review at least once per quarter. This will ensure you're staying up to date on customer roadblocks and haven't neglected an important account. Each session should include all team members that have customer-facing responsibilities. Be sure to record each review as this will create accountability for achieving the goals you set.
3. Review your most valuable customers.
Creating a detailed action plan for all of your clients would take quite a lot of time -- probably more time than you have to spare. With this in mind, I'd recommend starting with your top three clients, then work on the rest in descending order of priority. Since your top 10% of customers spend three times more than your average ones, these are the top-priority customers that you should focus on retaining.
4. Include all team members in the review process.
All team members that work or interact in any way with customers should be involved in the account development process. If you don't include the whole team, you'll create a culture of ‘it's not my responsibility,' like we discussed earlier. Instead, by involving your entire team every employee feels like they are a part of the strategic reviewal process.
5. Allocate at least 90 minutes for each review.
In my experience, you should allocate a minimum of 90 minutes for each meeting. Start by reviewing the last plan and the outcomes of those actions. Then update the plan with what you know now. Finally, determine the next set of actions you'll take to strengthen your relationship with the customer.
So back to my car insurance – it's just going to take one company to buck the trend and put their focus on customer retention as well as acquisition. This will make them really stand out from the crowd and customers, like me, will flock to them. If you're an agency or small- to medium-sized business, you need to ensure your service team is doing the same.