Tag Archives: Customer retention

Companies that just don’t give a damn

Categories: Management | Tagged , , | Leave a comment

In the competitive world of business, it seems that many companies deliver unfriendly and mediocre service and don’t even care. Employees stay a much shorter time at jobs than ever before in recorded history. It is only in Japan that a cultural type of loyalty exists between employee and the mother company. They have to be loyal for life — or lose a finger. Maybe I’m confusing corporate culture with the Yakuza — I get confused sometimes when I don’t get enough sleep.

In any case, putting bad jokes aside, I just can’t figure out why most service providers just don’t put much effort into customer retention. One trend I noticed is that small companies want to attract big clients and don’t care at all about little ones. This makes no sense because a few little clients add up to a big one, and if you lose a little one you are still in business. But, if your business only has two big clients, lose one, and you are done! But, putting big and small aside, why would a company want to lose any client? Clients bring in revenue, why wouldn’t you want all the revenue you can get?

Why do so many companies have people who just won’t call you back. People who just won’t get work done on time. People who tell you not to be so demanding? Do I have unreasonably high standards or am I just asking for the combination of respect and functionality?

If you want your company to grow, or keep its meager existence, start giving a damn.

On a brighter note, there is a huge company in India that gives a dam. Tata. They have built at least one large dam in India!

Getting a new client is 6x as expensive as maintaining an existing one

Categories: Marketing | Tagged , , , | Leave a comment

Customer retention is the name of the game for big companies who study analytics. I bet you study analytics too, right? Or, at least you take an interest in them, right? Well, if you don’t study analytics you can not be efficient as a business person, so it is time to start thinking about them now!

I read a study about a decade ago. It caught my attention since I’m a numbers and an efficiency oriented guy. The study said that for some of the larger phone companies, it was SIX times as costly to win over a new client as it was to maintain or retain an existing one. Phone companies are not limited in their size like our tiny companies. They can buy a new branch office in some remote part of the world at the drop of a hat (or a pin in the case of Sprint). They can maintain infinite quantities of customers and they try to get them too.

But, winning over a new customer for a phone company is not easy. They have to have special promotions, advertising (which is expensive), they give discounts for the first several months, or they give you a free piece of hardware. Many companies take a loss when trying to attract a new client. The costs only pay off if you can keep them for a long time. Maintaining an existing client is easier.

If someone is a client of your outsourcing company such as a call center, data entry company, etc., then they will have to go to a lot of trouble to find another company to take their job. If you are lazy, give bad customer service, or try to cheat them, they might leave you. Did you bother to calculate the long term profit that you could have gotten from that client in the life of your relationship?

What if your average call center client spends US$200,000 in the life of their relationship with you, and what if your profit margin is 5%. You just lose $10,000 by losing that client. Some companies try to cheat clients by a few hundred here or there in the beginning of their relationship. Perhaps they cheat to see if they can get away with it. Or, perhaps they cheat out of nature. Let’s say that you are getting $1000 per month from a client who would stay with you for four years. You will earn a gross revenue of $48,000 from this guy. Let’s say that in month three you try to cheat him out of $300 by creating a confusing bill with some undiscussed extras on it. He will start off by arguing with you. If he gets fed up he will go to another company. You will lose your $48,000 gross and $2400 long term profit because you tried to cheat him. Bad karma and dumb if you ask me!

What if you are just too busy to deal with your client’s concerns and complaints? The girl on the phone talks to quietly and your client’s customers complain about her. Are you too busy to find your client a new girl? Would it cost you 10 hours of labor to get a new girl? How much would it cost you if you lose the client altogether? How many hours would it take you to find a new client like him. Do you think about this? Maybe you should start thinking about this!

If analytics are a mystery to you, then find a friend who can explain basic business math to you, so you realize what you have to gain or lose by various types of business behavior!

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