What’s your retention risk?

Mat Wylie highlights the importance of retaining your customers in this tighter business climate, and how you can avoid ‘retention risk’.

As we come into tighter economic times, every business is already thinking about how to prepare for any potential downturns or how to compete against the retail giants now entering New Zealand. Many places are already seeing sales growth flatline.

In a world where it’s going to become even harder to get new customers, retention becomes even more important. So what is retention risk – and how can you avoid it?

Retention risk

Retention risk is the likelihood that a customer could come into your store once and never come back again. It’s a long-term customer having a bad experience and choosing to try a competitor next time just to see how they perform. It’s a customer who’s shopped with you before but nothing about the experience stood out, so they walk into a competitor’s store to take advantage of lower prices or more convenience next time they need to purchase.

It’s all the little holes in your organisation where a customer could slip away.

The worst kind of word of mouth

Across the 500,000 pieces of feedback our clients have collected over the past 12 months, more than five percent have been dissatisfied with their experience and are at high risk of walking away forever. This is also the five percent likely to tell their sister, their father, their friend or their colleague about the poor experience they’ve had – scaring off other potential customers as well.

Good businesses focus efforts on these people – solving their issues, trying to deal with their complaints. No-one wants unhappy customers going around bad-mouthing you or damaging your brand’s reputation.

The risk of ‘okay’

However, just as concerning is the fact that another 18 percent of customers are neutral about the businesses they’ve bought from. So many businesses think that because a customer isn’t bad mouthing your brand, they’ll stick around. Unfortunately, when someone’s only had an ‘okay’ experience, there’s nothing stopping them trying another brand or going for a cheaper option. They could be your customers now – but they could quickly be walking out the door.

In tight economic times, five percent growth could be considered fantastic. So if you’re losing five percent of your customers because of poor experiences, five percent could be a great growth opportunity.

If you’re losing even more thanks to ‘just okay’ experiences, you’ve got an even bigger potential opportunity on your hands.

Cutting your retention risk

Research has shown a significant correlation between improving customer satisfaction scores and growing sales, so we know this is important. In fact, one analysis showed a difference in growth of more than 20 percent when comparing similar businesses in similar locations.

But how can you reduce your retention risk and retain clients long-term? It’s simple – listen.

Find out what your customers think; how they found the experience of purchasing from you. What are the trends of those who had great experiences – how can you replicate those across your stores? How about the trends of those who didn’t have a great experience – how can you turn those terrible and even ‘just okay’ experiences around and mitigate your retention risk in the future?

When you get feedback, deal with complaints as they come up and you’ll give yourself another chance in the eyes of those customers. Try to encourage every one of your customer facing staff to consider how they can continuously improve and you’ll have a real impact on those looking to purchase from you.

Taking your feedback further; what would you do for retention?

If you knew that more than 23 percent of your customers were a medium-to-high retention risk, how would you run your business? How differently would your team treat customers, knowing that even an ‘okay’ experience could drive customers to try a competitor?

Now’s the time to start planning ahead and considering these questions. Reduce your retention risk, and you’ll set yourself up for long-term success – even in tight economic times.