Published: August 17, 2021 | Comments
Successful companies make it a strategic priority to retain customers because they know retention has a significant impact on their bottom line. When considering a company’s assets and liabilities, customers should be viewed as the greatest asset, and diligent work and time should be dedicated to making sure losing customers doesn’t hold much weight on the liability side of the balance sheet.
That’s because the cost of customer churn can be a cost multiplier. Here’s why:
Loss of revenue
When a company loses a customer, there is the obvious loss of their business, which includes any immediate loss to a company’s revenue, the loss of what could’ve been that customer’s recurring business, and the potential loss of a referral.
To compound the cost, new customers are not nearly as likely to try new products or spend as much. In contrast, an existing customer is 50% more likely to try a new product and spend over 30% more than a new one.
Increased cost of acquisition
Customer churn does not just mean the loss of revenue. It includes the expensive cost of trying to acquire new customers to replace those lost. Unfortunately, most companies focus more on customer acquisition than customer retention, despite the fact that it costs five times more to attract a new customer than to retain a current one.
So, customer churn is expensive. You want to avoid it. Where do you start? A company needs to identify why they are losing your customers by verifying and assessing the current state. By performing an honest assessment, you will identify factors needed to ultimately drive customer retention.
Consider the possibility that your customer experience is not what it should be, as churn is most closely tied to customer satisfaction. Consider the statistics below about American consumers:
More than half of Americans changed their mind about a planned purchase because of bad service (American Express)
- 33% of Americans would consider switching companies because of one poor customer experience (American Express), and that same percentage will pay more to receive a better experience (Genesys).
- Companies offering exceptional customer experiences have a 16% price premium on the products and services (PWC).
- 80% of consumers believe speed, convenience, and knowledgeable help are the most important factors to a positive customer experience (PWC).
- 65% of customers find a positive customer experience with a brand to be more influential than great advertising (PWC).
- 83% of consumers say an omni-channel experience, such as moving from web chat to a live conversation, is desirable (Genesys).
- Many groups – 79% of high-income households, 45% of women, 51% of B2B companies, 54% of Generation X – avoid a company for over 2 years after a bad customer experience.
As you assess your current state, ask your customers for feedback and be ready to act, evaluate your current IT solutions to see if they are capable of meeting current expectations, and consider bringing in an expert to help you with the process.
In a world of abundant (and sometimes overwhelming) choice, customers are empowered to select or ignore brands easier than ever. What makes a brand stand out the most? The customer’s experience with the company.
A customer’s experience is their perception of your brand and sentiment toward it. It is so powerful that its predicted to trump price and product as the primary brand differentiator by 2020. Top-performing companies take the customer’s experience to heart, and they are 50% more likely than their competitors to have a customer-centric journey with a seamless experience.
Even if you can increase your customer retention by 5%, you can increase your profit by 25 percent to 95 percent. In addition, 89 percent of companies already see customer experience as a key factor in driving customer loyalty and retention, and 45 percent of companies cite experience management as their number one priority.
Are you one of those companies? If so, what are you doing to improve your customer experience?
This post originally appeared in VDS.