*This content is sponsored by The Loyalty Specialists. Their Rewards, Your Growth, Our Speciality.
by Lauren Haworth*
Customer retention is the desired result of the nexus of multiple factors including product affinity, availability, variation, as well as targeted marketing but more importantly, relationships.
Relationships come with all types of connotations from âadminâ to âbeneficialâ and the list goes on. What is the missing link here? We all operate our lives based on relationships but often have no idea how to create, nurture and use them effectively.
Case in point – A shining beam of modern disparity sits on the shelves of Exclusive Books called, âA Manâs Guide to Understanding Womenâ by Teri Li and Terry Kepner. If you indulge your amusement for a moment, you may open it to find that itâs completely blank.
Relationships form the intrinsic network of our lives, yet our connections are weak at best. Relationships, in this case, apply to any relationship â whether it be between employer and employee, husband and wife, company and customers etc.
In order to develop a relationship, certain boxes need to be ticked, the most fundamental of which is trust. If the person/customer/partner you have a ârelationshipâ with can genuinely hold a firm belief in your reliability â then you have got a foundation.
Letâs take this concept of relationships and apply it to business. If you can develop hugely beneficial and rewarding relationships with your employees and customers, you can positively influence customer retention for a start.
Here are a few universal tips for improving relationships and customer retention:
- Creating expectations and managing them:
Businesses, through their marketing, create expectations and the success of a business is measured by the degree to which those expectations are met. If at any point, delivery deviates from those expectations, the businessâs ability to retain its customer is crucially eroded.
The way you mitigate this âavalanche of troubleâ is to create realistic expectations and maintain them at every point, with no excuses â this involves smart consistent communication.
Here is an example of bad communication leading to a mismanagement of expectations:
a vehicle manufacturer unveils this revolutionary âsmartâ car that has a game-changing engine. The customerâs expectations are created by what he or she sees in the brochure and decides to trade in their old faithful for this new âimprovedâ model of the same brand. A few weeks later, while this customer is filling up at a petrol station, they notice the coolant liquid bubbling in the overflow bottle. Experience tells him/her that the engine is over-heating. Itâs a brand new car so there is an immediate call to the dealership from which it was bought and serviced. The dealer tells the alarmed owner of the new car that it is not boiling, its bubbling.
This doesnât make any sense and the frustrated customer calls everyone, from the media to the companyâs public relations in an attempt to get proper answers. Finally, after the âWhite Houseâ has been woken up, they send a service engineer to check this vehicle with the customer.
After inspection, the service engineer explains that this vehicle has a normal mechanical water pump but in addition, it also has an electrical water pump that circulates the coolant through the hot turbo even after the vehicle has been turned off. This results in the circulating coolant bubbling in the coolant overflow bottle long after the engine has been switched off and this is normal.
The customer responds to the entire vehicle manufacturer by telling them if you had told me what to expect at the time of purchase, because this engine was so different, the angst and consequent level of uncertainty and distrust in the reliability of the car could have been avoided.
Smart communication to effectively manage the customerâs experience is essential. Donât leave them to create their own expectations â youâll never meet them. Stipulate what they can expect â always meet them, and if you can, exceed them.
Do what you say you will. If you cannot deliver on the expectations set â communicate as much in a timely fashion proposing alternatives. Manage expectations and youâll mitigate a plethora of headaches and reduce customer churn.
- Customer Engagement
Take the time to strategically understand your partner/customer. What do they like, love and what do they hate? Donâtâ know? Then ask! This knowledge is a guiding tool and a method of managing expectations.
Once you know what their likes, wants, and hates are â capitalize on the like, leverage the love and eliminate the hate as much as possible whilst managing the expectations that you have created.
Same with business: Once you have identified and segmented your customers, you can implement various marketing strategies for each segment that promotes something relevant with revenue potential.
These marketing segments will allow for direct marketing opportunities, like mailers, to send through highly-targeted, relevant and useful sales messages to the right customers at the right time. This also opens up opportunity to offer short-term rewards for each segment if they purchase additional products.
Smart marketing to existing customers will show them you are on the top of your game, know what they want and like and can anticipate what they will need. Communicating a message to your customers is just like communicating a message to your partner. It takes planning and strategy to get the response you want. This is about getting the information you need to communicate with your customer and manage their expectations.
- Service differentiation
Once you have identified your customer segments, isolate your top customers and create a type of rewards system that takes your offerings one step further. Make them feel special and create an ecosystem they simply cannot swap for anything else. The quality and value need to be real and obvious. What will ultimately be valuable to them will guide their expectations which you will be privy to and able to manage.
Much the same as treating your husband/wife differently to the way youâd treat your friends of the same sex. Hint: the husband/wife gets the premium package.
- Payment equity
âPeople only buy on price because they canât find extraordinary quality convenience, service and valueâ â Warren Greshes
Payment equity is defined as the customerâs perceived fairness of the price paid for the companyâs products/services and is closely related to customerâs price perceptions. This is influenced by the companyâs pricing policy, the competitors pricing and the perceived value of products/services offered.
The higher the payment equity, the greater the perceived utility of the purchased products/services which positively affects customer retention. This is supported by empirical studies done by Bolton, Kannan, and Bramlett 2000; Varuki and Colgate 2001.
In other words, people weigh up what benefits they get in a partner versus how much admin these come with. If the advantages (quality, variety, utility) outweigh the price (admin) then most will perceive it as a good deal.
But, payment equityâs effect on your share of the customerâs wallet is not quite the same. People with higher price perceptions though, are less likely to grow your share of wallet because due to their nature, they will shop around for the best prices which can divert their spend across the industry.
In this case, try deselect the partners/customers who tend to âshop aroundâ â itâs better for everyone to just let them go.
Conclusion
- Create realistic expectations, then manage them continuously and surpass them if you can
- Segment your customers into marketing groups based on likes, loves and hates then target relevant messages and products to each
- Differentiate your service to your top customers, they are key to retaining revenue and growing it from within
- Provide value to the extent that people wonât dispute the price. If it canât be huge value in one thing, let it be small value in many things done well.
Key take-away: consciously manage expectations at every level and you will find it easier to engage with and retain existing customers, converting spurious loyal customers to truly loyal customers.
- Lauren Haworth is Executive Head of The Loyalty Specialists
