A customer-centric focus is not a new concept in business. Over the years, many companies have talked how ‘the customer the king’ or that ‘the customer is always right’. However, what is changing before our eyes is the relationship between customers and companies. Customers now expect not only to be equal partners with those with whom they do business, but also to have their voices heard and heeded in driving product and service evolution.
This journey starts with communication – without it, the journey will end, inevitably very swiftly. However, with the right tools and right understanding of customer needs and lifecycles, communication breeds loyalty.
We recently looked at the customer loyalty issues facing fifty top global technology-enabled businesses. Startlingly, this research found that in 54 per cent of cases where a customer has left, or failed to renew a contract, this was simply due to an inability to reach that customer.
Sales teams just could not – and had not – historically communicated with those customers to find out how their service was performing, or was being used. They therefore also did not know how it could be improved, adjusted and, critically how they could have ensured a renewed relationship.
The issue of loyalty is one that has been compounded by a number of factors. Firstly, there is no doubt that the current economic climate across Europe is pushing the limits of loyalty. This is a challenge that some businesses are addressing by ensuring that their systems are robust enough to deliver critical customer data when they need it, so that they are one step ahead of client challenges – and one step ahead of the competition. Others are concerting efforts into new business.
However, research from the White House Office of Consumer Affairs shows, on average, loyal customers are worth up to 10x as much as their first purchase. Further, the same research points out that it is 6-7x more expensive to acquire a new customer than to keep a current one.
In other words, your current customer base is worth more to your business than it cost to acquire it. But it’s only worth more if you can keep the revenue you have with them, and then sell more to them. This is what recurring revenue is all about. And it is increasingly important to all companies because it is the measure – and value – of customer loyalty expressed in £’s to your bottom line.
In the case of the recurring revenue, the communications journey is markedly different to new business outreach.
For a start, the customer journey is fluid and ongoing, with no “final destination” to determine success. There are multiple decision points along the way, during which the customer has to decide whether to stay with your offer or go somewhere else, and what is important in gaining the re-sale is different from a new sale.
In re-selling a service – just as in the prevailing subscription model many tech-enabled forms are moving towards – the customer needs to be convinced of the on-going value of your offer, rather than just making a single decision at a set point in time and subsequently living with the consequences.
They need to have gained value from past usage of your service; they need to believe there will be value in future usage; but most importantly, they need to be contacted and given the opportunity to re-purchase. So your customer interaction needs to be an on-going and active dialogue, building a relationship between you and your customers.
What is your business strategy for improving customer retention? Do you even know what your recurring revenue track record truly is? If you aren’t able to answer these questions now, my advice would be to find out quickly, before your Board asks. Because they will…