I’ve got three concepts that I’d like to share with you today and work through to make sure that you actually understand and how interrelated they are, and the impact of not fulfilling one of those thoroughly has on the other drivers and the other costs within your business.
Those concepts are:
1) The cost of customer acquisition.
So how much does it cost to bring new customers into your business?
2) Measurements around customer retention,
so how much time are you spending looking at when your customers leave? What their average duration that they stay with you is? And what their average spend patterns are?
3) Customer satisfaction.
Customer satisfaction, when low, increases the customers leaving your business. This, therefore, means you end up spending more money going out and finding new customers, and acquiring new customers.
Now the cost of acquisition is really really high. In lots of businesses, one of my past clients for example, in the banking sector, used to take four years to pay back the cost of acquiring a new customer. So if they didn’t then deliver on high levels of customer satisfaction, those clients would leave before that payback period had actually taken place. Now it’s quite an extreme example, but I think it’s really really worth pointing out that customer satisfaction is really so important.
I just don’t think most businesses, and I’m talking everything from the airline industry, that I had a really poor experience with last Thursday, due to their lack of customer satisfaction regardless of their supposed customer loyalty metrics. All they way through retail stores, and membership platforms, businesses don’t seem to appreciate the importance of customer satisfaction. As a result, they never seem to look at the effort they invest into customer loyalty and customer nurturing. This investment is really lacking, and yet so important!
Why does it matter? Well, it’s ridiculous to think that we go out and we spend this massive amount of money and energy and effort, in acquiring new customers. Whether to come into your retail store; or to engage in a long-term project or lifetime relationship as a supplier.
You see, once you’ve got customers in your business, you’ve really got to keep them happy! You have to be constantly investing energy and effort into nurturing them and rewarding their loyalty. Look at where you can really ”wow” them with your customer service.
If you don’t do that, you will never build a raving fan base that will go out there and refer you across to new customers. We call that the Net Promoter Score. It’s the score given on “how satisfied are you with the experience you just had with us?”Anything less than eight out of ten is deemed to be dissatisfaction and should prompt you to ask, what needs fixing. If you want to have raving fans you are looking for a 100% success rate that mean’s they will refer my friends and family to your services, and exponentially grow your business.
Also, if your customer satisfaction is low, you won’t keep your customers for as long. Which then drives this cost of acquiring new customers back up again, in terms of your operations.
So, take the time, to go away and assess how well really are you looking after your customers? Why should they stay with you? And what are you doing to keep them on board using your services or products?
If you do that, you’d be amazed at how much you can reduce the costs in your business. And deliver better satisfaction to your clients!
So, I hope that’s helpful to you. Let me know if you’ve got any questions, or any thoughts, on how you might be able to do that better in your business?
I’ll see if I can come up with an answer or suggestion for you.
Thanks, and have a great day!