Unfortunately, most traditional marketing practices are centered on attracting new customers, instead of retaining existing ones.
Developing a strong bond and loyalty is based on building relationships that can result in reducing presales costs and improving profits from 25% to 85%. Retained customers can be developed to provide greater profitability.
Two ways to strength customer retention is by
- Creating a switching barrier
- Delivering high customer satisfaction
Switch barriers making difficult to switch by using loyalty discounts and make it extremely easy to do business with you.
The best way to keep customers is by delivering high customer satisfaction. This makes it harder for competitors to capture your customers even by offering lower priced offerings. The task of achieving high customer satisfaction can be done with Relationship Marketing.
Relationship Marketing embraces those efforts to know and serve better-valued individual customers. This involves The Customer Development Process.
- Prospects – strongly interested in the offerings and have the ability to pay for it
- First-time customers – convert to Repeat customers, may continue to buy from competitors
- Repeat customers – convert to Clients, may continue to buy from competitors
- Clients – convert to Advocates, only buy from the company in relevant categories.
- Advocates – convert to Partners, praise the company and encourage others to buy from it.
- Partners – the customer actively works with the company to get customers or improve the business or opportunities.
The challenge is to keep the customer satisfied and reactivate dissatisfied customers with win-back strategies.
5 levels of investment in customer-relationship building are:
- Basic Marketing – salesperson sells offering
- Reactive Marketing – salesperson sells the offering and encourages the customer to call him back for questions, comments, problems & complaints
- Accountable Marketing – salesperson sells the offering and after the sale, he calls the customer to check if he met expectations, to help and resolve any problems
- Proactive Marketing – periodically calls the customer about the improved products uses, helpful tips, understand & listens to customer, invites customer to events, offers promotions, etc. – building an on-going relationship
- Partnership Marketing – works continuously with the customer to discover ways to effect customer savings, benefits, and performance, provides finder fee, resell your product in his sales bundle or subcontracts you
The goal of all this is to develop more loyal customers and increase sales revenue. However, the company must spend more to build greater customer loyalty. The correct levels investment in customer-relationship building with the Customer Development Process will yield more profitability for some companies than in others. Investing should be done on an individual customer basis. The question boils down to “How to anticipate those customers that will become Clients, Advocates, and Partners?” and “Who are those customers with least amount of maintenance with higher sales?” Most companies practice either the Basic Marketing or Reactive Marketing because the investment doesn’t justify the gains if the unit profit margins are too small. Even if customers don’t convert to the stronger loyalty positions in the Customer Development Process, the overarching objective is to keep profitable customers for a lifetime and this may require some invest.