I have been saying for at least 30 years now that the most attractive (and profitable) customers any business can have are the ones that you already do have. It's more important to deepen your connection to your existing customers than to spend a lot of time and money trying to figure out why certain customers left. After all, while you might learn some things from the process, you can't really water yesterday's crops. In any case, it feels a little too much to me like crying over spilt milk. Extract the necessary lessons, fix what can be fixed, and move forward.

Good, existing customers get better and more valuable over time (increased spend, referrals, lower maintenance costs, etc.) and they represent the absolutely lowest-hanging fruit for incremental business (product and service add-ons, extensions, new offerings, service plans, etc.) as well as the greatest and easiest opportunity to increase your share of their total spend. (See Why Knocking on Old Doors is the Best Strategy.)

So it's absolutely critical to do everything you can to hang on to your good customers and clients. Nothing is more important to your bottom line than preventing customer attrition and avoiding churn. Look at the cell phone industry. The churn rate hovers around 1%, despite tons of advertising designed to make people change carriers. The reward for that customer retention? Lush profit margins north of 40%.

If you can't do this, and you're spending a fortune on the front end to pull in new customers while you're losing them out the back, your company's going nowhere fast. It's like kissing your sister or as Yogi Berra used to say about his road trips: "We're lost, but we're making good time." The truth is that, if you're losing existing customers as quickly as you adding new ones, you're not making or building anything - you're just treading water - and once you run out of money, they make you go home.

The name of the long and winning game is to "own" your customers for life and to exceed their expectations throughout your relationship with them. Today we have the tools and the data concerning virtually all of our customers, which should permit us to totally manage our relationships with them if we invest in the available information and-- most importantly-- if we know what we are looking for. Everything in life happens on a continuum (or a series of cycles) and your job is to monitor your customers' timelines and jump in at the appropriate junctures, long before the competition is even in the game, to make the next connection and the next sales.

When you're already in their wallet, you can absolutely work wonders. And when you're already connected to them through low-cost digital marketing and communication channels, assuming you haven't abused the privilege or their patience, you have an inexpensive and very direct channel to reach out to them with customized, personalized and timely offers consistent with their prior activities, past purchases, and interests. It's a marketer's dream scenario and it's the very essence of what I call "smart reach". (See To Sell More Your Marketing Must Embrace Smart Reach.)

Part two of this process is making sure that you stay out in front of the customers and aggressively anticipate their desires, demands and requirements so that the offers you make to them make sense. As Steve Jobs used to say, they may not even know what they want; it's your job to entice, excite and encourage them in those next directions. If you do it well and consistently, the customers may never reenter the competitive marketplace since you are effectively and pre-emptively satisfying their needs. (See Keep Your Customers by Thinking Ahead of Them.) Today, I think there's probably no better example than the Amazon Dash buttons, which permit on-site, as-needed, immediate re-ordering right in the consumers' homes at the place and precise time when they need to replenish essential supplies. Be there when they want to buy.

The job of staying ahead of your customers is equally true whether you think you are selling a product or a service. The smartest operators know that every business is really a service business today because the real nature of every business is that it's always about making the next sale, managing the next interaction or event, delivering an uninterrupted stream of service, etc. You never want the customer "to come up for air" because if he or she does re-enter the marketplace and starts shopping around, your job becomes a million times harder.

So the ongoing task and the critical questions are always the same-- how do I know when to act and how do I pre-empt/intercept the customer at exactly the right times in our relationship? The answer is actually easier than you would think because even though the start- and- stop points on the cycle may vary by customer, every customer will move through the same cycle. You just have to understand and learn how to measure and manage the cycles.

The basic cycles are pretty much just extensions of human nature. It's a process that we are all already familiar with and living through every day ourselves. The primary phases are:

Desire Leading to Decision

Action Leading to Satisfaction

Boredom Leading to New Desire

We want it, we buy it, we love it for a while, we get tired of it, and we want something new. Sound vaguely familiar. Well, here's a flash, this is a process that every single one of your customers is going through right now. Your job is to figure out who's where, in which phase of the cycle. It's important to understand that the cycles are going to vary dramatically depending on a variety of important considerations and they will vary from industry to industry as well.

Some of the variables will impact the types and durations of the cycles but not the fundamental stages or phase within the cycle. These include: (1) how large and financially/emotionally important is the transaction; (2) how often is a transaction likely to occur and what other connections/interactions with the customer will take place between transactions: and (3) how easy is it for the customer to switch vendors, services or products and how readily available are competitive offerings?

But, regardless of a given cycle's duration, there are similar cycles to be identified, tracked and managed in every business and properly managed, these cycles are the keys to keeping your customers for life.

 

 

Published on: Oct 25, 2016
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.