Customer Focus is a Profit Strategy!
This happens in a couple of ways. Truly customer-focused companies have loyal customers. Loyal Customers: - buy more,
- cost less to serve because they know your processes,
- tell you when things go wrong so you can fix the problems and
- tell their friends, family and associates about how great you are and as a result you get more customers.
Also, customer-focused companies are more productive. Employees are motivated, and perform their jobs more effectively.
Re-work, duplication of effort and mistakes are significantly reduced. These all cost you money in terms of time spent, money spent, loss of productivity and loss of business.
Your turnover also reduces so you keep your staff longer and don’t experience down-time, productivity losses and employee morale related issues.
If you are still not convinced, consider the following:
It’s 5 times more expensive to attract a new customer than to keep an existing one.
About 75% will do business again if the problem is resolved to their satisfaction.
90 to 95% will do business again if the problem is resolved on the spot.
Customers are willing to pay for quality service.
An increase in customer loyalty will have a direct positive impact on your bottom line.
The cost of poor service has a direct, negative impact on your bottom line.
Let’s examine these points in more detail.
It’s 5 times more expensive to attract a new customer than to keep an existing one.
It is safe to say that it is far more profitable and far less costly to keep the customers you have by building their loyalty, than it is to keep replacing them with new customers.
Determining what it costs to acquire customers is a bit intangible for most people. As you can imagine, at lot goes into getting customers to walk into your place of business or call you. Advertising, merchandising, promotions, premises expense, phone systems, salaries and so on are costs associated in part with getting customers.
Someone has to pay for this.
Normally payment comes through the proceeds of revenue you get from the sales of your products and services. Sometimes we tend to take this for granted.
Say for example, the cost to your company to acquire a customer was $500.00. If you lose that customer your investment of $500.00 is gone. What is of greater concern is that the cost to replace that one customer is now $2,500.00 (5 X $500.00). What if you lose 100 customers?
That’s got to hurt your business!
Research has proven that once you have a customer, your cost of keeping him/her drops dramatically over time. When you lose a customer you will inevitably incur a higher cost to replace the one you lost.
Assuming your cost to acquire a customer is $250 and based on the fact that it is 5 times more expensive to acquire a new one, your new customer acquisition cost would be $1,250 for each new customer required to replace one that defected. Let’s be ultra conservation and say that you lose 20% of your customer base due to service defection, (if you are not truly customer-focused, it could be even higher), then based on the example above the annual cost to replace 20% of your customer base would be $62,500. Over five years this cost would be $312,500 and you would have turned over all your customers in that period.
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