Imagine a customer walking into your store, with a big fat sign saying “I’LL SPEND $80,000” plastered across their forehead.
Chances are, you’d attend to them pretty quickly. You might even accommodate a special request or two, because it’d be worth it in the long run for that kind of money.
After they’d spent their first few hundred dollars, you’d probably give them a call back and see how their experience was. You’d keep in touch, engaging them with useful content and ensuring consistent touchpoints with your business.
Once they’d spent their final dollar, it wouldn’t come as a shock when they moved on. After all, you knew that once the customer had spent $80,000, they would no longer have a need for your services. You’d be pleased that the relationship was beneficial for both parties, and part ways on good terms, not wanting to burn any bridges in case they had other friends with big juicy signs on their foreheads.
How about the reverse?
What if that prospective customer you’ve spent weeks chasing only had a $70 tag hanging over them—would you still waste time trying to pin them down for a meeting?
If they came and spent $70 with you, would you spend hundreds of dollars trying to get them to spend more? Unlikely. You’d recognise that they weren’t worth the effort—of course, you’d deliver a great service if they were eager to do business, but you certainly wouldn’t spend much time or money bending over backwards to win and retain their business.
The mistake too many businesses make
When it comes to winning and losing customers, too many businesses fall on the wrong side of the story above.
Two obsessions drive this failure:
- An obsession with winning customers… Regardless of their lifetime value, however low it may be.
- An obsession with never losing customers… Even if the relationship has naturally run its course, and they’ve reached the limit of their lifetime value.
The trouble is, these two obsessions cause one great neglect—existing customers. Those customers who have been won, who aren’t actively trying to leave, yet are no longer being taken care of in the way they used to.
Take the power industry for example. The last few years I’ve been a Mercury customer, and have constantly seen or heard about new discounts Mercury has in place to attract new customers—20% off for the first three months, cash back, free hour of power, movie tickets—you know the stuff I’m talking about. Yet, as an existing customer, I get none of that. The result? When a high winter power bill came through a few months ago, I decided to make a change—I jumped over the Power Shop, and now save $50 a month. Mercury tried to make me jump through all sorts of hoops and pay a disconnection fee in order to leave, while Power Shop are confident enough in their offering, that they allow customers to come and go as they please.
There’s a misbalance of attention when it comes to customer attraction and retention. Your existing customers are the bread and butter that pay your business’s bills—don’t neglect them at the expense of new customers.
Extending your customer lifetime value
It’s not exactly a secret that retaining customers is cheaper than finding new ones – so why aren’t we retaining them? It turns out that 60-80% of customers who described themselves as satisfied don’t do more business with the company which left them satisfied. Whether that’s because they don’t feel any loyalty, have gone for a cheaper option, or simply forgot who they did business with in the first place, that all happened because of one thing – disconnection. They simply weren’t connected with your business, with your brand.
Instead of consistently focusing on marketing to your prospective customers, consider how you’re connecting with your existing customers. How do you give them an experience that’s more than ‘satisfactory’? How are you wowing them? Are you consistently delivering results that not only meet, but exceed their expectations? Are you building a personal, emotional connection with them? If you’re doing all those things, your customer lifetime value is bound to be higher than a simple one-off transaction.
Why losing customers can be a good thing
Here at ROCKETSHP, we lose customers.
It’s not a bad thing—it’s simply a reality. Gone are the days of 30 year business relationships; those that do exist are an exception, not the rule. The reality is more like three years.
These days, the first thing that happens when a new executive takes over is they clear out the old executive’s relationships and bring in their own people. That’s how they make their mark, and it’s perfectly fine—if you’re smart, it can work in your favour.
When a relationship has run its natural course, don’t lose sleep (or money) trying to hang on to them. If you can tell a new manager has it in for you, be comfortable walking away from that relationship—though it may seem like you’re kissing goodbye to revenue, more likely than not it will only be a drain on your P+L anyway.
A few years ago, the Marketing Manager changed for one of our customers. I could tell straight away they wanted to drop us and use a different agency—not because of anything we’d done wrong, simply because they already had a favourite digital marketer.
My loyalty lay with the company’s CEO, so we hung on for 18 months trying to make the relationship work. Just a few months ago, we made a small mistake (it happens to the best of us), and the Marketing Manager finally had his chance to drop us.
If I could do it all over again, I would have ended the relationship 18 months ago, and saved my staff the constant hassle of dealing with a customer who had it in for us – plus we could have left the relationship with both the CEO and Marketing Manager feeling positive about their experience with us.
Instead of focusing on whether or not you’ve retained a customer, focus on your deliverables. Are you constantly producing results for clients? If yes, then you have nothing to worry about—the customers that want to leave will naturally do so (but will do so with a positive view of your company), and the others will remain thrilled.
What it all boils down to is knowing your customers’ worth – and making sure you’re actually delivering on that worth.