Know Your Customer: 4 tips for increasing your customer retention rate
By Colleen Francis
It's much easier - and more profitable - to keep an existing customer than it is to land a new one.
Don't believe me? Just look at the numbers.
Research tells us that most North American companies lose half of their customers every five years. We also know that as little as a five-percent increase in customer retention can increase profits by a whopping 75-95 percent. While this percentage can vary by industry, the overwhelming increase in profits is caused by three major factors:
- Lower costs - selling to existing customers is between five to fifteen times less expensive (and takes far less of your time) than acquiring a new customer;
- More referrals - satisfied customers are only too happy to refer you to their friends and colleagues, further reducing the time and cost of landing new business; and
- Greater revenues - every time you lose a loyal customer, you also lose the revenue stream they generated until you can find a new client to take their place.
The key to keeping your customers happy is to find out precisely what motivates them, what is most important to them and what they want most. Then, simply find the product that gives them what they want at the best value.
The following are four of the best practices used by some of the top firms in the country to increase their customer retention rates - and maximize their profits.
1. Measure your current status
A very effective technique I discovered a couple of years ago is the third-party interview. Customers often won't tell you to your face the things you most need to hear, especially if it involves a criticism of your product or service. However, they're not nearly so reticent - or so flattering - when an independent third party asks them for their feedback.
If you want to know what your customers are really thinking, consider hiring a professional consulting company or telemarketing firm to conduct customer-satisfaction surveys on your behalf.
the criteria for success
Determine what's most important to the parties involved - and make sure your definition of success is consistent with that of everyone else.
Sales people often take action based on what they think is important, rather than what is truly important to their clients. To be certain you understand your prospect's real challenges, ask leading, open-ended questions that allow them to reveal their real needs. For example, you might begin a conversation with something like:
"John, when I speak to executives like yourself, most often they tell me that although their business is going great, they have concerns about (name a problem your product addresses). Is this a problem for you?"
"Mary, when I speak to executives like yourself, they find our products are able to solve problems in one of three areas: (specify the three key issues your product addresses). Are these problems ones that you can identify with?"
This process helps you determine which product features or benefits you should focus on. The key is to pick a few serious or common problems that your product can solve. That way, you're almost guaranteed that your prospect will say: "Yes, that's a problem for me, too!" Then you can follow-up by asking them to be more specific about the problems they're facing.
Remember: as a general rule, a sales person should talk only 20-30 percent of the time, and spend the remaining 70-80 percent of their time listening.
3. Know your customers
To serve your good clients well (and to decide which clients deserve the best service), you have to understand their strategic direction, how they operate and who makes their decisions.
Your salespeople can collect this information by writing up detailed account plans for your top 30 percent largest or most profitable accounts. These plans should include a review of the client's industry and revenue projections as well as information on how you are positioned in their industry, the threats to your position, your most recent customer satisfaction results and plans for expanding within the account and building and maintaining executive relationships.
You can also ask your salespeople to review the plan with your executives to get additional insights on how to maximize the opportunities presented.
4. Ask questions
Successful sales people uncover specific problems first, and then align their products as solutions to those problems. So what are the right questions to ask your prospect?
Those that move the prospect from an intellectual position of knowing they have a problem that needs to be solved, to an emotional state of trusting you to solve that problem for them.
The right questions, in other words, are those that reveal true buying motivations and get the customer engaged in a conversation. Unfortunately, many people are often vague when asked what is most important to them.
To help clarify exactly what your customer needs, avoid non-specific inquiries and focus instead on probing questions that will establish exactly what is expected - questions like:
- What are your top three priorities defining the success of this project?
- Specifically, what is most important to you?
- When you reflect on this project, what needs to be in place for you to feel that it is a complete success?
- What does success on this project look like for you?
- How will you do that?
- How will you deal with that?
- What plans have you made to handle that?
- How is that working for you?
- How do you mean?
- What have you done to fix that?
- When you say (insert vague word here), what do you mean by that?
- How will you use that to your advantage?
- How will your toughest competitor react to that?
- Is that what you really want?
If your prospect still has trouble being specific, make some suggestions to help them. If they really don't know what they want, start by asking them what they don't want. Explain that your questions will help you better serve their needs, so they can take their own business to the next level.
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Make sure you check out Colleen's latest book, Nonstop Sales Boom for powerful strategies to drive consistent sales growth quarter after quarter, year after year.
Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Armed with skills developed from years of experience, Colleen helps clients realize immediate results, achieve lasting success and permanently raise their bottom line.
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