For years, Jason has been an avid exerciser. Running and weightlifting are part of his routine. With such an active exercise regimen, energizing music is required. The iPod Shuffle came along to fulfill his needs. "Wow! All my music on this little stick! This is great," Jason thought. "But, hmmm ... I'd like more flexibility." He knew he would upgrade to the newest iPod.
Soon, it was time to replace his PC. "I was pulling my hair out dealing with the viruses that had plagued our poor computer. My co-worker had been excitedly telling me all about his iMac. I had to check it out. What did I find? More features, free training, free support and better quality than I had expected. More value for my money than anything else I had compared."
Now, Jason owns not only one, but two Macs and an iPhone. Jason has become a loyal Apple fan. But, they earned his loyalty.
TIMES HAVE CHANGED
Recent economic indicators show a recovery in gross domestic product, consumer spending and corporate profits. The good news is the economy is beginning to grow. The not-so-good-news is that growth will be slow, taking longer for your profits to recover. In good times, customers were plentiful. In this climate, customers are harder to find. So keeping the customers you have is more important than ever.
Research finds that a modest increase in customer retention can turn into big profits. Successful companies report that a retention rate of even 5 percent can pay back as much as 75 percent in profits over the life of the customer relationship. Over time, loyal customers will continue to buy and even spend more across your product lines, just like Jason did with Apple Computers. Meanwhile, the cost to serve and retain those loyal customers decreases. As a result, profits and overall customer lifetime value increase exponentially.
How do successful companies extend the customer lifetime value of their retention investments? Successful companies have a clear understand-ing of how they add value to create strong, loyal customer relationships.
TURN RETENTION INTO PROFITS
Understanding how to add real value to customer relationships begins with seeking meaningful customer insights, allowing you to set the right priorities that return significant payback. Value relates directly to what customers care most about. And, what customers care most about is directly related to what they need from you.
For consumers, value often means providing products and services that make life easier. Ultimately, your customers' experiences will determine your ability to retain the relationship and grow lifetime profitability. Let's look at a simple example.
Are you a coffee lover? If so, you may frequent Starbucks or your favorite local coffee shop. Coffee lovers demand high quality flavor and freshness, a mouth-watering aroma, and want their coffee served piping hot. But, convenience, without sacrificing the quality of each cup of coffee, is also important. These are fundamental requirements for coffee lovers.
What would make you pay a premium price for a cup of coffee and return again and again? First, Starbucks knows it must nail these fundamental requirements every time. But, Starbucks also knows they must take these customer requirements a step further, giving you something more that will keep you coming back.
To hook you, Starbucks has created a powerful, unique multi-dimensional customer experience. You know that this cup of coffee was made for me just the way I like it. And, you're served in a friendly, respectful environment. Starbucks takes each value producing opportunity, or VPO, and delivers them consistently across each critical dimension.
With a customer-first focus, strong business results follow. Starbucks is the model of service and loyalty for not only coffee shops, but for many other companies and industries worldwide.
KNOW YOUR VPO
What can you do to add real value and build customer loyalty? Start with a seven-point assessment to help pinpoint your loyalty and VPOs. You probably don't have the answers readily available. Get the crew working on this self-assessment. Customer interviews and an honest self-examination will be key to your process.
How are satisfaction and loyalty characterized by your customers?
What does value mean to your customers?
What are customers' expectations of you?
How does your actual performance compare to customer expectations?
What factors contribute to your current performance?
How do you compare to the competition in the eyes of your customers?
What are your significant value producing gaps?
Answers to these questions are fundamental to the potential of your company and will reveal your VPOs. Use these insights to focus your resources for growth. Follow these simple reminders to turn your retention efforts into big profits:
Be a valuable resource. Stay focused on what customers need from you and be relentless in exceeding their expectations.
Be easy to do business with. Don't make customers jump through hoops. Ensure your business processes are simple and high-quality.
Be timely. Don't make customers wait. Be on time for scheduled deliveries and service calls. Schedule appointments at times convenient for customers.
THE BOTTOM LINE
Customers vote with their feet ... They take their pocketbooks where they get the greatest value for their money. Make sure they continue to vote with you!
