We spend much more time, money and effort on attaining new customers than on retaining the ones we have already. It’s a fact that companies in all industries, including ours, are structured around customer acquisition rather than retention.
In his new book "Never Lose a Customer Again: Turn any sales into a lifetime loyalty in less than 110 days," Joey Coleman focuses on the long-neglected subject of customer retention. He writes, “Businesses don’t catch as well as they chase.” Think about it: We spend gobs of money on marketing, advertising, sales calls, trade shows, travel and entertainment in the course of acquiring new customers.
In terms of our teams, we pay and reward our salespeople much more elaborately for gaining new customers than we do for retaining our current customers. In many cases, it’s almost as if we grow bored with our current customers and would rather enjoy the chase of the new possibilities that come with new customers.
I must admit, for my own experience, I have been known to chastise salespeople who call themselves “relationship managers” and prefer salespeople who say they are hunters and prospectors. While reading this book, I often had to stop myself and ponder whether I have been right in doing this. Maybe, in some cases, I have not looked at the larger picture.
Let’s look a little closer. Coleman poses these questions:
- How much time do you spend wining, dining, and courting prospective customers?
- How much money do you spend trying to acquire new customers for your business?
- How many people in your company focus on marketing and sales?
- How much time, money, and energy do you spend on trying to keep your customers?
They are pretty daunting questions, aren't they? It's especially true when you consider the fact that it is 10 times more expensive to grow your business by new customer acquisition than it is to grow your business with your current customers.
Now, think about how much easier it is to provide your current customers with your best service than it is a new customer. You have already been through all the growing pains you incurred by learning how to properly service your current customer. The relationship is established, they know who you are, you are on their AVL already and they will pick up the phone any time you call.
Compare that to the months of rejection and anguish that comes with customer acquisition. Now, please, don’t get me wrong. Customer acquisition is a critical part of running a business and that will always hold true. All I am saying is that we need to spend as much time and effort keeping the customers we have. As it stands now, most of our effort is on new customer acquisition to the detriment of keeping our current customers happy.
So, let’s turn to why we lose customers to begin with. It might surprise you to learn it has been proven that the single most prevalent reason we lose customers is this: They feel neglected after the sale is made.
Let’s think about this. Why do they feel neglected? It’s quite obvious if you take a moment to think about what most of us are guilty of.
First, we spend all this time, money and effort treating our prospective customers like royalty, filling them with the hopes and dreams of how wonderful it will be when she becomes one of your customers. Often, these promises are made by a salesperson who will be handsomely rewarded for bringing this customer in.
Now, what happens after this highly rewarded salesperson brings the customer in? He is sent out to get another customer, acquires the customer, and the customer is then turned over to inside sales or customer service. Good people to be sure, but they are busy handling the hundreds of customers you already have. This customer service person, who is not compensated for new customer acquisition, looks at the new customer as just another responsibility on top of the already huge pile of customers she is responsible for keeping happy.
The same applies to the rest of the people in the company. The prospective customer, who has been treated like royalty by the salesperson for months or maybe even years, is now just part of a slew of customers who are all competing for the time of your already overburdened non-salespeople. They did not go on the dates, they did not treat the potential customer to all of the amenities that the salesperson did, so they feel abandoned and neglected.
To make matters worse, if the new customer calls on their old friend—the salesperson--to ask for help, and the salesperson tries to accommodate the request, we kick his butt and tell him to mind his own business, which is just to acquire new customers.
I've reached the end of this column, but not the end of the subject. I'm just getting started! Stay tuned, as next week I’ll be talking about how to remedy this terrible situation. I will discuss how we keep our customers as happy as we promised they would be when we were courting them.
It’s only common sense.
Dan Beaulieu is president of D.B. Management Group.