Customer Acquisition Versus Customer Retention

by Paul Travis, Executive Interim Manager

Two buzz words that are thrown around in boardrooms all the time are customer acquisition and customer retention. Research done by Rockefeller Corporation tells us 68% of your customers will leave because they feel that you no longer care about them. It’s not because of the product or service and not because of the competition. It’s because of how you are treating your own customer.

In my own practice I work with clients on how to distinguish between different classes of customers. We never have just one customer, we always have different constituencies of people that we are serving. The place that I usually focus on is customer relationship management. This is the class of technology systems that have become the back office for most companies. Some are still not doing it very well. Sales may have one data base and product support has another database. People in the field know about their own folks, and they’ve never put things into the computer, so customer information can be lost.

Numerous studies have been done over the years that show that it will cost anywhere between 5 to 9 times as much to sell to a brand new customer as it does to sell to a customer who we’ve already had. It’s much more profitable. Why not use customer relationship management systems and the distinction between acquisition and retention to be able to target and build that base of high mind share?

Sustaining Customer Service While Cutting Costs

A recent article in BusinessWeek titled Customer Service in a Shrinking Economy, discusses how companies are dealing with the need to maintain a high level of customer service while there is tremendous pressure to cut costs. For instance Zappo’s CEO Tony Hsieh is shifting dollars that were previously used to surprise new customers with overnight shipping and instead focusing these resources on overnight shipping for the most loyal customers.

Here’s an excerpt that describes how BMW was able to cut costs while improving customer satisfaction in dealerships by offering free wifi.

When No. 22 BMW rolled out Wi-Fi service at its dealerships last year, the move was intended to give customers a cheap way to pass the time while their cars were serviced. The cost was next to nothing since BMW just expanded the broadband dealers already used to run their businesses. But now that customers can use their waiting time productively, fewer are opting for free loaner cars, which are pricey for dealers to maintain. BMW’s Alan Harris says Wi-Fi, along with software that helps dealers better estimate loaner needs, has helped BMW cut its monthly loaner expenses by 10% to 15%.

The article found that the best service companies are finding ways to creatively cut costs without sacrificing service and allocating their scarce resources to retaining loyal customers rather than trying to acquire new customers. This is often better than simply cutting customer service staff, which Hertz did when it announced layoffs of 4,000 employees on January 16th. Loyal customers became very frustrated when there was not enough staff to help them and many customers probably left due to bad experiences.

Bad experiences can have a damaging impact on a brand since customers are much more likely to tell others when they are unhappy and encourage their friends and family to avoid that company. I recently heard a story at a company party in which Delta refused to help out this poor individual who needed to fly out a day earlier when her interviewer had something unexpected come up. From talking to the agent she learned that it would have been easy to change the flight since the plane was mostly empty, but the agent and her manager were on a mission to do everything they could to not help the customer. They actually said that they would only help her out if it was an extreme emergency like a funeral, in which case she would have to provide a copy of the death certificate! They made the customer pay an extra $180 dollars to re-book, which was as much as buying an entirely new ticket. It made me wonder if Delta management instructed agents to be extremely difficult if someone wanted to rebook, so they could double charge the customers for added revenue. However, tactics like these only lead to angry customers who actively avoid doing business with you in the future.

Photo by Thad Zajdowicz

Learning From Your Customers

by John Moore

Mark Hurst over at the Good Experience blog posted his 10 steps for becoming the VP of Customer Experience at your company.

He speaks of forming stakeholder groups and offshoot ad-hoc teams, implementing “skunk work” projects, and championing the cause throughout the organization.

Good stuff … but his 10-step process could use an extra step … a step zero.

For anyone wanting to be a VP of Customer Experience, especially at an offline retailing business, start at STEP ZERO and immerse yourself fully in the role of the front-line employee and treat every interaction with customers and fellow employees as a learning experience.

Experience your business as employees and customers do by GETTING OUT OF THE OFFICE and GETTING INTO THE STORE!!!!

Learn first-hand the nuances of the customer experience from the employee perspective.

Learn the challenges front-line employees experience in delivering consistently good experiences to customers.

Learn how front-line employees can be better equipped with tools, resources, motivation, and training to deliver consistently great experiences.

Learn how to better design store layouts and improve merchandising sets from watching and helping customers navigate through the retail environment.

Learn how to improve upon products/services offered by hearing first-hand feedback from customers and by seeing how customers interact with products on the selling floor.

And when you return to the office to form teams of stakeholders charged with improving the Customer Experience, don’t forget to include the most important stakeholder – THE CUSTOMER.

It’s just as much a necessity, and maybe more of an imperative, to include the Customer perspective in Customer Experience projects just as you include the perspectives of marketers, product developers, and operators.

This article was orginally posted at Brand Autopsy and is licensed under the Creative Commons 2.5 license.

Ensure They Remember the Rose, Not The Thorns

Paul Travis is a principal at OneAccord which provides interim executive services. Mr. Travis is based out of Seattle with 25 years of experience in high technology, marketing, and consulting.

Has this ever happened to you? If not, just imagine: You’re in the grocery store and buying some pasta from the bulk foods section. You wrap up the bag, wait in line for the checker, and discover you forgot to write down the four-digit product code. So you ask everyone else to wait a minute while you make the trip back to the bulk foods section to get the number for the scanner, then walk all the way back to the cash register — all the while asking yourself how come the store couldn’t have a bulk food product list for each checker.

Well, multiply that frustration by 10 and you’ll know my experience this weekend in Wenatchee National Forest. You see, a few years ago the US Forest Service began charging for use as a way of increasing their shrinking revenue.

Unfortunately, they have ignored customer convenience in the equation. I spent an HOUR driving back from the beautiful trailhead parking lot over mostly unpaved, extremely bumpy roads to the ranger station just to obtain the lousy $5 permit. The USFS did equip, amazingly enough, their ranger with the appropriate supplies to ticket anyone not displaying the pass.

How can you use this lesson in your business? Make it easy to do business with you. See the entire customer experience through their eyes. Identify and address the thorns they encounter, so they instead remember the rose. Otherwise, that’s what shapes your brand and reputation.

You might even ask, in person or through a survey: what could we do to improve our service? (Only do this if you’re brave, because you will get an earful — and will then have to evaluate those suggestions and implement the feasible ones!)

Photo by peasap

Paul Travis, Principal OneAccord
phone 206-910-2222
Paul.Travis(at)oneaccordpartners.com

Do you make your customers uncomfortable?

by Greg Verdino

I bought a suitcase at Target. As the cashier rang me up, she asked me to unzip the case and proceeded to check not only the main compartment, but also each and every zippered pocket, to make sure that I wasn’t hiding shoplifted items in the luggage I was buying.

I realize that shoplifting is a very real problem for retailers, that Target is simply protecting its financial interests and, on paper, the “checkout search” seems like a reasonable preventative measure. But as I stood at the register, with the cashier checking my new bag for other, stolen merchandise — in plain view of other shoppers — I left pretty uncomfortable. In fact, as I stood there I began to feel like maybe, just maybe, I actually had done something wrong and I would now be found out.

This policy seems like a great deterrent, but at what price? Am I likely to make another large purchases at Target, knowing that I may be subjected to another similar experience? Maybe, but I’d think twice.

But this post isn’t really about Target and their anti-shoplifting measures (after all, they’ve got a business to run and margin to maintain.) This experience got me thinking about all the things we do that seem to serve the needs of our businesses but could have unintended impacts on how our customers feel about our brands.

The sorry truth is that most of us probably do this kind of thing far more often than we realize.

In the real world, it might be the snooty maitre d’, a restaurant’s “no sharing” policy, the car salesman’s frequent trip to “speak with my manager” behind closed doors, the pushy cold caller, the unhelpful customer service rep. It’s charging customers who are already paying a fair (or more than fair) price for your services for extras that could be offered at no charge.

In the digital world, it’s the onerous registration form, the lag between online inquiry and email (or phone or snail mail) response, the “fancy” web experience with scant payoff, the annoying flash ad that expands to obscure the content that the site visitor is actually trying to read. It’s anything that stands between the consumer and the information/content/experience/product they really want.

None of these things seems especially harmful — we’re exclusive, we’re just negotiating to make sure we earn a reasonable profit, we’re only trying to do something cool, hey we’re busy but we’ll get to you when we can — but that doesn’t mean our customers will see things the same way. In fact, they probably won’t.

It isn’t enough to keep our own business needs in mind, consumer be damned. It is our obligation to see each and every action through our customers’ eyes and do what we can to make them feel comfortable. Comfortable doing business with our companies, supporting our brands, with the product choices they’ve made. This new mindset might cause us to rethink some of our current policies and decisions and retooling our efforts may even cost us some money in the near term. But it will help differentiate us from our competition and more than pay for itself over time.

Think about it: who would you rather do business with? A company that makes you feel good about your choice and yourself? Or a company that makes you uncomfortable about those very same things?

This work is licensed under Creative Commons.

Photo by bonkedproducer