Depending on which study you read, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. And retaining the customers you have could be critical to your success as we emerge from lockdown.
Your company may be starting to grow through new customers, but it’s important to maintain the level of service to the existing clients that has got you this far. Growing your work with them could be at least as important as finding new clients, and if your performance starts to slip, as resources and attention are focused on the growing sales funnel, your reputation and your revenues could suffer.
Client retention makes sense: you don’t have to spend time and resources convincing someone new of the value of your product or service – you just have to keep the client you already have happy. According to research done by Frederick Reichheld of global management consultancy Bain & Company, increasing customer retention rates by 5% increases profits by 25% to 95%1.
So how do you maintain relationship with existing clients and, if possible, grow your business with them?
Rich in opportunity
Martin Brown, our chief executive officer, has more than 20 years’ experience in business development across a wide range of industry sectors. He says: “The growth and retention of existing clients, through proactive management, is rich in opportunity, low in risk and in cost.”
An existing client will often be unaware of other products and services you offer, he says, providing the opportunity for growth. Risk is low because your business already has the client won over and has established points of contact. “Therefore, another piece of business becomes relatively quick, simple and easy to process.”
He continues: “It is a relationship that when working well, has your client acting as an advocate and believing that your business is an intrinsic part of their value chain.” But the danger, he says, is that clients are “underserved and left to drift”, which can result in poor customer experiences and high churn rates.
He suggests regularly surveying customers to understand what they want from your service or product offering. “Establish what you do well and where you can improve. And consider whether your clients would refer and recommend you to other companies.”
Not paying attention to what existing customers want could mean opportunities to win new business are needlessly lost. Martin reveals: “So often we see a customer that buys product or service A from a company but would also buy B, C, D and E if only they knew the company offered this.”
And he adds: “Be strong on proactively raising your prices – if the client and market can take it – and seek to increase the value and number of transactions. This notion of ‘juicing’ the client might sound harsh but, in reality, it is a mutually beneficial approach.”
Martin believes there is great value in customer loyalty: “Companies seeing that their peers are enjoying great service from you is a key factor in persuading them that they might want to experience the same journey.”
However, he points out that client retention calls for particular talents from your team: “The right skill set is more of the clichéd farming, cultivation approach rather than the new business hunter, so strong on building relations and a desire to deliver excellent customer service.”
Serial entrepreneur Chris Sheppardson, CEO at EP Business in Hospitality, who has founded several businesses in the hospitality sector, agrees with Martin: “Service is a key differential if one wants to retain customers. Good business has always been about keeping the customer happy, yet we have lost this focus over recent years.
“Client retention is one of the most overlooked areas today and yet the cost of losing a client is far greater than the cost of recruiting a new one – particularly for smaller businesses.”
1 Prescription for cutting costs, Bain & Company, 25 March 2021.
This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.