Customer Retention Requires Creating Loyalty

Happy New Year! Will it be a happy new year for you? How was last year? Did it work out pretty well? Meet or exceed your expectations? If you didn’t like last year, wishing for a happier new year isn’t going to help you get one. My best informed guess is that 2012 is likely going to look a lot like 2011 from an economy point of view. That rising tide that floats all boats isn’t going to help you in 2012. Truth is, you’re going to have to perform differently if you want different results.

If the economy remains challenging in 2012, then you should continue to focus on the two best marketing strategies in a down economy: growing your share of customer, and customer retention. (If you have a unique strategic opportunity to gain new customers because of some event, by all means, jump on it if it makes sense. But in a down economy, taking customers away from the competition profitably, is very difficult.) Last month, I talked about the concept of growing your customer share or customer wallet share. The idea is to understand how much business is available from your customer, and then make sure you find a profitable way to get more than your fair share of it.

This month, let’s focus on customer retention. While you may not have that problem now, it is imperative you make sure you don’t have it in the future. I recommend using Fred Reichheld’s Ultimate Question approach to measuring customer loyalty to see how you are doing. You can learn more about this approach free at short.productionmachining.com/loyalty. I believe you will find this concept easy to implement without any real expense, and it is a proven way to know how you are doing and get the feedback you need to improve, before it’s too late.

The second part of customer retention is creating loyal customers. How do you do that? Surprising answer, based on research, is to screw up and fix it. Please note, I am not advocating screwing up more. I am focused on the fixing it part. Loyal customers tend to be created by how you fix the problem. So let’s understand what matters to customers when they consider how well you “fixed it.”

The most important attribute in how people evaluate how they feel about you fixing the problem is how fast you fix it. If it takes too long to agree to fix it, and/or to actually fix it, it really won’t matter what you do. If the customer feels you messed up a batch of product and your customer service person can’t approve a replacement or other fix that meets the customer’s needs, but rather has to check with her supervisor who can’t approve it either until they check with you, well, that’s likely to take too long.

If you want speed to fix problems quickly, empower and train your front line people to help the customer.

The next thing the customer wants is an apology. ”I’m sorry” is not an admission of guilt in any state in the Union, so if you have trained your people to “never apologize if it wasn’t our fault,” you are making a mistake. It’s not about right and wrong. In truth, the customer is often wrong, but part of what they pay you for is to make them look good. Don’t let them feel it is their fault or that they are stupid. They can get that treatment anywhere.

Last, train your people to ask some variation of the question, “What can we do to make this right?” The vast majority of the time your customer’s request will be less expensive than what you would have done, and it will be what they want: a true win-win. On those few occasions where they may ask for something that is not doable, you can always say no. However, before you say no, remember that several years ago we knew that when a customer had a good experience with you they told a few people, and when they had a bad experience, they told ten or more. Today, when they have a bad experience they create a website called YourProductionMacheShopSucks.com and tell the entire world. What would that venom focused on praising you be worth?

There are some people out there who will cheat you. Don’t focus on them—focus on the 99 percent who are honestly trying to buy a great service at a fair price. That’s what makes business fun and profitable. If you want a happy new year, take the actions necessary this month to set the ground work to, as John Luke Picard used to say, “Make it so.”