“Success for businesses is about a triangle of customer service, marketing and word-of-mouth, and customer loyalty is the one thing that underpins that whole structure.” – Sheffield-Dunstan, Amélies
When trying to attract customers, companies bring on their ‘A’ game and provide top class customer service. They appear relentless and dedicated and very often their efforts pay off and they gain customers. Given this initial experience, customers tend to stay on and continue the cycle of buying but soon enough companies lose focus on keeping profitable customers. They divert their attention to another round of customer acquisition – repeating all the ‘nice’ things to gain new customers. The company’s focus remains on these new customers and before they realize it, the time for the first set of customers to buy again comes around. However, if the company has not done enough and made efforts for keeping profitable customers – will they return? For keeping profitable customers attracted, a company must give them significant reasons.
New customer acquisition is an extremely vital exercise and every business must engage in doing so in order to expand and grow. However, by ignoring existing profitable customers, companies make a fatal mistake. Customers expect companies to appreciate their business, value their association, and make them feel special throughout their association with the company. Feeling neglected or being given less attention forces customers to lose trust in a company and they would much rather do business with a company that does pay due attention to them. Losing profitable customers is extremely detrimental for any business – size and stature notwithstanding.
There are a large number of statistics and research to prove that acquiring new customers and getting them to the stage of being profitable is at least six times costlier than retaining and keeping profitable customers. Despite these real time proofs, most companies still seem to focus more on customer acquisition and pay a lot less attention to keeping existing profitable customers. This is probably because most companies seem ignorant of who their most profitable customers are and hence are unable to keep them long enough to turn them into loyal ones. Businesses seem to wrestle with the definition of what constitutes profitable customers – and it certainly is not about the ones who spend the maximum with a business. These ‘spenders’ could also be high maintenance customers, expecting perfection and unrealistic service, which puts a huge strain on the company and its resources. Hence, despite the fact that these customers spend money with the business, they would also be draining the business of as much or perhaps even more.
With the aim of keeping profitable customers, it is important to first understand your existing customer base and segment them depending on the amount and number of resources spent on keeping them. Consider which customers seem to make more demands and whether the business they provide is profitable enough to meet those demands. Such customers are worth keeping and a company can afford to provide them with better customer service, which in turn would retain them for longer and turn them to profitable customers and over time, to loyal ones. Keeping a close watch on the existing customer base should be a process – since even profitable customers could become non-profitable if their needs and expectations change. They may not spend as much on the resources provided by a company, but would still be enjoying preferential service and would be using up as many resources of the company as before. Conducting regular research will enable a company in keeping profitable customers and rooting out others.
For keeping profitable customers, companies must also pay close attention to their sensitivity to price. Customers could become less profitable if their situation changes – their business takes a down turn for whatever reason, leaving them with lesser disposable income, could be a major reason for higher sensitivity to price. They would need to consider each spend very carefully and could reduce the amount of business or even stop it completely. Companies that pay close attention to keeping profitable customers, would know when such changes occur and would even be able to predict changes in customer behaviour. They would need to provide even greater value to the association and ramp up the level of customer service such that customers would not mind even a slightly higher price point. They would be confident that the company would care for them and cater to their needs better than anyone else. It is not easy to switch service providers and companies would much rather stay with a company that they have reason to trust.
For keeping profitable customers, it is vital that companies keep a close watch on how well they serve their customers and what more they can do to keep customers happy and turn them loyal. It makes good business sense to proactively, serve customers – addressing their needs before they ask – this will greatly enhance the trust and confidence they have in a company. Even if they may not need the company’s offerings or could no longer afford them, they would be sure to recommend them to others and possibly come back when things get better. Of course, providing top class service comes at a price and companies must ensure that the customers are profitable enough to justify the costs. Many companies make the mistake of cutting service costs, which directly affect the quality of service and force profitable customers to leave. Rather than cutting costs for all, it would be better to do so for those customers that would be a drain on the company’s resources without the resultant profits. Such initiatives and strategies must be part of the overall customer service strategy of the company and must be implemented before profitable customers decide to leave.
When a company makes efforts towards keeping profitable customers, what they also gain over time are enthusiastic brand advocates. Anyone running a business will tell you such customers form the cornerstone of a company and can potentially increase the size of a business just by recommending it to others and sharing their positive experiences. Customer brand ambassadors can have a significant impact on the opinions and views of other existing and potential customers – existing customers would tend to buy more and potential customers would begin to buy simply through the word of mouth recommendations. By keeping profitable customers, a company can build an ‘army’ of loyalists, ready to defend them in tough times and help them to improve in every aspect of business.
With so much competition for companies and a plethora of choices for customers, getting customers to pay attention is becoming increasingly tedious. Companies spend huge amounts of money, time, and effort in trying to gain customers and then in building trust – it just makes sense to ensure that none of these resources be in vain. It is wise to do everything possible to nurture every association, lead it to a point of profitability and mutual benefit and then making effort in keeping profitable customers – who would with some more effort, become brand ambassadors after a period.
Repeat customers are profitable customers and keeping them should be among the top priorities for any business. Without long-term customers, willing to spend with your company repeatedly, all a business would have is a vicious cycle of come and go customers, who would drain the resources and never reach a point of profitability. Can your company afford this?
