The customers that have been powering your growth in the good times have the highest potential for being the source of future growth. What can be done in terms of customer retention now to maximize revenue in the tough times and prepare for recovery?
Compute Customer Lifetime Value Now
If your company does not go through the formal exercise of determining CLV, now is the time to start doing so. It provides a no-nonsense view of which customers are worth spending time and effort on to retain. Here are key areas to cover:
Identify your best customers with a few key metrics
If you suspect that your customers’ lifetime value has changed because of the economic situation, it may be wise to supplement CLV with other metrics. Regularly computing tenure, recency, frequency for all your customers represents a time commitment especially if you run a transactional business with many small customers. But it is a surefire way to filter out customers who may be the cornerstone of your growth in the future. They may be your high CLV customers but also may be…
- Long tenure customers that are the very loyal and that keep coming back. They are a great source of referrals and testimonials for the company.
- High frequency customers. If their purchases are small they can represent a significant drain on your Sales and Support resources. Properly managed they can be steady source of profits.
- Customers that have been recently acquired. They need to be carefully examined for the very best ones that will be earmarked for special service and attention from everyone that touches customers in the company.
These customer categories have tried and hopefully appreciated your value proposition. Design low cost but well timed programs to amplify their pre-existing propensity to buy your products, especially for seasonally based purchases.
If you go the extra mile for them now, they will remember it
Challenging times offer a unique opportunity to be helpful to customers and thus build goodwill in a way that is difficult to replicate in normal times. Dell created a lot of goodwill by dropping prices after 9/11. Home Depot has special plans to make sure the supply of critical items is replenished in emergencies such as hurricanes. Helping customers by delivering the right value during difficult times is an excellent way to build long-term value in the relationship which should translates into higher CLV.
Put in place automatic customer vulnerability alerts
If you have been mapping and managing your customer experience across the company, you already have a good view of all your customer touch points. Now is the time to leverage that process by combining customer service discussions, sales feedback, web activity, ad hoc online customer surveys, comments on the company blog, channel feedback to paint a picture of the vulnerability of your best customers. Not integrating critical data across functions is an obstacle to early detection of upcoming customer defection. It’s also time to (over-)communicate with customers in some relevant way to understand their circumstances and detect significant shifts in the climate of consideration for your offering.
Select for special retention actions the most vulnerable on the list that you believe have a future. They may fall in various categories: unsatisfied, not quite in the target market, one-time customers : estimate what modification of the offering, the messaging, the channel, would keep them while keeping an eye on incremental marketing investment vs. incremental gross margin. Taking a portfolio approach to allocating marketing budget to different customer categories can give you a framework for reducing the overall risk of your retention efforts.
Conduct loss analysis to thoroughly understand why you are losing top customers
It is sometimes hard for management to obtain systematic and detailed information on the reason why certain sales were lost. It is critical to do so at times like this especially with good customers. You may be losing sales from your best customers because competitors resort to radical discounting in tough times. That requires a different response than if you discover that your value proposition has become somehow less relevant to your customers.
Provide something “free” and valuable that helps in tough times
If business is slower and you have not downsized to the point where there are no internal resources available, it’s a good time to beef up services for the customers that are the bedrock of your long term success. That means offering a better quality response on everything from customer service, tech support to free consulting during the sales process. Providing valuable information on industry trends and solutions can make a difference and position you as an authority in your field.
You can also turn your best customers into evangelists with a well-designed loyalty program that rewards referring other customers to you: it may be the best way to reward them and grow revenue.
Choose to support select customers in trouble
This is a strategic decision and obviously depends on each company’s financial situation. You may have some customers that are “too important to be allowed to fail” or some customers that are partners in a crucial new product launch. These situations are often delicate to manage. Hopefully, this co-dependency will be a profitable one in the long run.
Tags: Customer Experience, demand generation, lead generation