My team and I at Acceleration Partners recently decided to cut ties with a vendor. We had been a client for six years and had a six-figure contract with this company, but their team failed to really engage with us as a partner.
We had to deal with a lot of turnover on our account team and ultimately found the vendor was not very responsive to our feedback about ongoing issues.
When the time came to renew our contract, we told this vendor we would be taking our business elsewhere. That's when a funny thing happened. After years of passive service, company executives were suddenly trying hard to sit down with us. Once we told them we were leaving, we were being offered meetings with vice presidents. This turnaround made it more obvious than ever that our business had been taken for granted.
Surprisingly, this is a common occurrence. Companies are so fixated on new clients and sales that they forget to do anything to retain the clients they have. Many companies invest big bucks in acquiring new customers, yet don't spend a 10th of those resources protecting their existing revenue streams. This is a misguided strategy.
In today's marketplace, every company needs to make retention a business focal point. I would go so far as to suggest that many companies need a chief retention officer (CRO), someone whose job is to ensure that client retention is a core business function. Here are three reasons why your leadership team might be incomplete without a CRO.
1. Retaining customers is more profitable than finding new ones.
It's common for companies to pour significant resources into sales, including compensating sales teams at a higher rate than other teams. At face value, this is understandable--client acquisition is difficult, and it's vital to growth.
However, long-standing clients are often the most profitable, because the sales and marketing costs of attracting those clients have already been absorbed. For example, Bain & Company has revealed that financial service firms that can raise their retention rate by just 5 percent typically see 25 percent to 95 percent increases in profits. It is cheaper to retain existing customers, and clients with long-term loyalty are often more likely to make large purchases because they know the high quality of service they can expect.
Given how profitable it can be to raise retention rates, it seems obvious that companies should work hard to retain existing customers and keep them happy over the long term. This means creating mechanisms for supporting this goal. Having a CRO on your leadership team will ensure that retention is always a high priority.
2. Happy customers drive referrals
In addition to driving profits, focusing on customer retention can boost your company's reputation and help drive new sales. Loyal customers provide case studies and testimonials that you can feature when pitching your business to new prospects, and the people who enjoy working with you can become valuable ambassadors for your brand.
At Acceleration Partners, we've had many clients promote our high standard of service to other potential customers. One of our clients even partnered with us at four different companies. Customers often trust other customers--if you go the extra mile to provide excellent client services, you may find that your clients will sell your business for you.
3. Customer retention requires leadership and the right incentives
When was the last time you offered a bonus to someone for keeping a client happy?
Like many facets of business, achieving high customer retention is only possible if company leaders make it a top priority--and this means creating the right incentives and systems. It's important to think of retention as a long-term strategy and a core part of your business.
At Acceleration Partners, we recognize that current clients deserve as much focus as clients in our sales pipeline. To support this goal, we have made retention a key factor in our executive bonus programs. And, since first impressions are so critical, we have created a Client Success Director role dedicated to onboarding customers, and established a 100-day client onboarding plan.
Our system is centered on establishing our values right from the beginning so that our customers know that they are in good hands. We then keep the good relationship going by having people on our team reach out regularly to support each customer's experience with us.
Having a CRO on the leadership team can help ensure your company makes retention systems like these a strategic priority. I know from experience that doing so can make a big difference.
Don't underestimate the importance of retention--it is the backbone of a successful business. Hiring or empowering a chief retention officer puts this important goal front and center, thus driving profits, building ambassadors for your company and setting your business up for long-term success.