Customer loyalty key to any business plan

In the past few months I have been writing about how to increase the number of leads your business receives and how to convert more of them into clients.

In the past few months I have been writing about how to increase the number of leads your business receives and how to convert more of them into clients.

Today, I want to address how to retain the clients you already have worked hard to get.

Customer loyalty should be a key focus in any business, with good reason. Estimates suggest it can cost six times as much to get a new customer as it does to keep an existing one.

A business that is not paying proper attention to this is like filling your gas tank with a hole in it. You have to work even harder to pay the increased cost to drive your vehicle.

Working out how big the hole is for your business is the first step to take in improving your customer loyalty. The next is understanding how and why they are leaving.

Working out how many customers leaked out is not just simply comparing the number of customers you have now to how many you had at this time last year; that would give you your net gain/loss of customers.

To measure how many customers you have lost, you also have to measure how many you have gained in a period.

An example would be: Your business started with 150 clients and ended with 200, for a net gain of 50. However, you added 75 new clients. The difference between 75 new and the 50 net gain is 25, so you lost 25 clients.

The formula is (number of beginning clients) + (new clients) – (number of ending clients) = (number of clients lost).

It is important to find out why customers leave? The six main reasons for customers taking their business elsewhere are:

l Death — one per cent;

l Moving away — three per cent;

l Buying from a friend — five per cent;

l Sold by a competitor — nine per cent;

l Product/price — 14 per cent; and

l Perceived indifference — 68 per cent.

The biggest reason of all is perceived indifference, that is, the customers don’t think that you care about them or that they matter to you.

If this is the reason for them leaving, then it is a really tough job to win them back.

The key focus should be to keep them happy while they are a customer.

This is very much a case of prevention being better than the cure.

These days, with the abundance of alternative options available to customers, you really have to focus on keeping them satisfied. Simply providing them with the product or service is not good enough.

Here are seven tips for providing that extra bit of attention that will make your customers want to keep coming back:

• Master delivery — deliver on time every time. Inform your customer if there is a problem and explain how you are going to deal with it. Then follow up and make sure that everything turned out OK.

• Make sure your invoices are correct and delivered in a timely fashion.

• Thank-you notes thanking them for their order or business.

• Follow-up calls to find out if everything is OK (like they do when you have a meal in a restaurant).

• Prior notice of new products or of an upcoming sale.

• Deliver your product with an unexpected gift.

• Send cards — birthday, anniversary or any other date relevant to the customer.

• Depending on the product, a follow-up call to offer them another or a refill or an add-on.

Most of these things are not difficult to do, yet very few businesses do them. Make them a part of the way you do business and you will have made a very important and valuable improvement to your business.

ActionCoach is published on the second and fourth Tuesday of every month in the Business section of the Advocate. It is written by John MacKenzie, whose Red Deer business ActionCoach helps small- to medium-sized organizations in areas like succession planning, systems development, sales and marketing, and building/retaining quality teams. MacKenzie can be contacted by email at or by phone at 403-340-0880.

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