Four steps to earning more customer loyalty
While new business is a crucial component of growth, it may not hold the key to your business development success this year.
Rather, building trust and loyalty with existing customers may be one of the most important components of growing your bottom line in 2011 - especially considering many companies and individuals may be hesitant to enter into new contracts, given the uncertain economy. Data from CRM Magazine shows that acquiring new customers can cost five times more than satisfying and retaining current customers, and a 2 percent increase in customer retention has the same effect on profits as cutting costs by 10 percent.
According to a study by the Harvard Business Review, on average, American companies lose half their current customers within five years. At the root of this is something called Pareto's Principle or what is commonly known as the "80/20 rule."
In 1906, an Italian economist of the same name created a mathematical formula to describe the unequal distribution of wealth in his country. He observed that 20 percent of the people possessed 80 percent of the wealth. In business, it's nearly the same: 80 percent of sales come from 20 percent of customers. The value of the Pareto Principle is that it reminds you to focus on the 20 percent that really matter.
Often times, too many businesses neglect that loyal 20 percent of their customer base in pursuit of new customers. While it is important to build your customer base, the downside is that it's very expensive to make the first sale. It takes a lot of advertising, promotion, time and energy to land that new customer.
On the contrary, sales to an existing customer are relatively inexpensive and profitable. But to truly build loyalty that translates into increased sales, it's crucial to have an existing strategy that reinforces the loyalty of your existing top customers and energizes them to become evangelists for your business. To quote sales and customer service guru, Jeffrey Gitomer, "Customer satisfaction is worthless, customer loyalty is priceless."
So, as you revisit your 2011 growth strategy, here's the first of four ways you can do just that:
1. Focus on the principles of spectacular customer service and loyalty
Often times, companies boast their customer service as "service with a smile." Sure, a positive attitude is important, but truly meaningful customer services require more than a smile. Every contact with a customer is an opportunity to gain loyalty and boost your company's customer-focused image.
At Comcast, for example, we strive for something more when it comes to superior customer service by focusing on three key principles: empathy, flexibility and personalization.
First, to reach the upper echelon of customer service you must practice empathy. Customers who come to you with a complaint provide a unique opportunity to make it right - but only for a fleeting moment.
The first step is to calm your customers with words and prove commitment with action. Even if your customer is wrong, sometimes it's better for repeat business to take the loss and compensate the customer.
The next principle - flexibility - builds upon empathy. Flexibility allows you and your employees to feel empowered to deliver whatever is necessary to build trust and loyalty.
Think about the last time something went wrong with a product or service and you called the company to report the problem. It's likely that the first action the customer representative took was to probe the cause of the problem. Meanwhile, the problem is still there, likely getting worse and everyone's getting frustrated. Instead, you might consider finding the most effective solution to demonstrate that you're the kind of company that will do whatever it takes to keep your customer's business.
The last principle concerns personalization, or understanding that one size does not fit all. One type of customer service doesn't suit all of your customers. For example, is there an opportunity for you to give customers more choice when it comes to paying their bills? Some may want to pay online. Others may wish to receive a hard copy.