It’s a well-known fact that it costs far more to gain a new customer than it does to keep one you already have. In fact, it costs between five and seven times more. It stands to reason, then, that companies that understand the lifetime value of a customer and seek to develop ongoing relationships with existing customers are going to see sales grow more profitably.
But it can’t be left to luck. Many businesses make the mistake of believing that, if their product is good, repeat sales will automatically follow. This can lead these companies to under-invest in retention strategies and force them to over-invest in customer acquisition strategies, to compensate.
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Think about how hard a company like Amazon works to encourage you to make more purchases, once they have you on the website. In fact, Amazon spent $7.2 billion on “marketing” in 2016 alone. Some of that was advertising, to get people to visit the website for the first time, but a significant amount went on getting those customers to stick around or come back. From up-sells and recommended offers, through customer-driven wish lists and subscribe and save deals, to “save for later” functions on your shopping cart, Amazon spends a lot of time and money making its shopping experience sticky and keeping your spending within the Amazon universe.
The difference between companies that grow and outpace their competitors and those that do not is down to the specific retention strategies employed. Let’s look at four of the best for the coming year.
1. Show you care
This is the big one. Studies show that 60% of customer departures are down to indifference on the part of the business. You’ve spent all that money making the sale and simply failed to follow up with some after-sales care and show your customers you appreciate their business. The good news is, this is a fairly easy situation to remedy: you only need do better than “indifference” to reap the rewards and stop customers from leaving.
Businesses can make a difference with as little as an e-mail or a quick courtesy call, asking if the customer enjoyed their purchase and if there is anything else they need. It may add some short-term cost but compared to the cost of acquiring a new customer it’s a drop in the ocean.
2. Recognize your VIPs
This is an area where airlines can teach other businesses a thing or two. Carriers have long understood the value of distinguishing Club Class, Business Class and First class from Coach and offering VIP lounges and services. But to be fair, these customer types self-identify fairly obviously buying the ticket type. How can other types of business identify their VIPs?
If companies can monitor and understand customer intents at every point where they interact with the business, then they can see which ones spend the most, which ones are most likely to post a positive review, or share content about the company. These customers can then be clustered together and targeted for specific deals and rewards.
3. Use predictive analytics
The benefits of developing a clear understanding of long-term customer intents does not stop at identifying the best customers. Business owners can use machine learning equally to head off attrition at the pass. Decision makers cannot be everywhere and sometimes those on the front line are those least able or least empowered to make judgments or decisions about whether a customer may be about to leave.
However, AI solutions can play a role here, since they can be everywhere at once. By pulling in the big data across all interaction points and analyzing the full range of intents, predictive systems can deliver forecasts in order to help business owners learn more about what kind of customer behaviors or concerns immediately precede attrition.
Armed with this knowledge, business owners can tackle the problem at root by modifying the experience that leads to the attrition event. Not only that, but companies can go further still and intercept customers whose behaviors indicate they are about to abandon, offering them incentives to stay.
For example, a customer that searches the site for “delete account” obviously is looking to leave. But that does not mean the customer truly wants to leave. It may simply be that specific concerns they have are not being addressed. When the business fully understands the customer intents it can counter that search with answers to the unspoken questions, such as: “How can I pay less for the service?” or “How can I get a more tailored service?” and so on.
4. Make an emotional connection
Internet and mobile technologies have made it easier than ever to do business at a distance. But while there have been significant cost efficiencies in doing away with the need for physical presence, the result can end up somewhat alienating for customers.
At the end of the day, people want to do business with other people and feel like they are being treated as people. But adding a friendly face doesn’t have to cost the earth. Emotional connections can be made using tone of voice, color branding and multimedia such as video.
AI can play a role here too. Just because you are using machine learning that does not mean the user experience has to become more machine-like. In fact, AI can help “warm up” and humanize the relationship by understanding customer intents better than humans can and effectively “showing empathy”. This means solving customers’ problems before they have even voiced them.
So you can see how the much-vaunted march of the robots is not threatening at all. On the contrary, a more integrated use of sophisticated artificial intelligence applications around business interactions promises to help companies build trust, develop relationships and show the human touch. All of which will do more to retain your best customers than a new advert.