Here is a guest post from my colleague, Jon Picoult of Watermark consulting.
The biggest risk facing businesses today is also one of the most manageable.
That’s my conclusion after reading Lloyd’s of London’s newly released 2011 Risk Index report, which ranks the top concerns of companies around the world based on a survey of over 500 C-suite and Board level executives.
So what was the #1 business concern cited by these folks? [Hint: It wasn’t “volcanic eruption,” which came in at the bottom of the list.]
It was “loss of customers” – an understandably scary prospect for any business, but also an eminently manageable risk.
In contrast to many other types of risks that can literally come out of nowhere, the drivers behind customer attrition can be diagnosed and addressed with pretty good precision. And it’s an exercise worth investing in, because the payoff can be considerable.
Customer retention (or, more accurately, customer loyalty) can be a very powerful growth driver, particularly in challenging economic circumstances. As numerous studies have shown, a mere five percentage point improvement in customer retention can potentially double a company’s profits.
So, if you’re worried about losing customers (or if you’re just looking to prime the growth engine), what can you do? Here are a few tips to start with:
- Investigate customer defections. While it’s bad when a customer leaves your business for a competitor, what’s even worse is failing to learn anything from that exit. Departing customers have a valuable perspective to share. Whether you solicit that perspective yourself or obtain it through a third-party – just be sure to get it. You’ll learn volumes about what frustrates your customers and triggers their defection.
- Open the feedback spigot. Don’t wait until customers attrite. Take their temperature while they’re still with you. Survey them periodically (preferably using a measure of loyalty, rather than one of satisfaction). Find out what they’re saying to your front-line staff. Listen to their chatter on social media. If there’s trouble brewing, customers will rarely take the time to tell you – so be sure to ask and listen before it’s too late.
- Act on what you learn. When you identify triggers of customer defection, it needs to be more than an academic exercise. If you don’t do anything with the intelligence gained, then you might as well have never questioned customers in the first place! Find the themes in the feedback and translate those into specific, time-bound remedial actions that are owned by a single individual.
- Communicate. If you’ve made changes to your business based on what you learned from current or former customers, don’t keep it a secret. Tell customers (particularly at-risk ones) about it. It may help get the relationship back on stronger footing, as people see that you’re making a genuine effort to address customer concerns and eliminate sources of frustration.
As the Lloyd’s study illustrates – if you’re worried about losing customers, you’re not alone. But you can do something about it.
If you have a customer retention problem, or fear one may be looming, the solution is right before your eyes, in the form of your very own customers – those who have recently left and those who are still with you.
Listen to them, learn from them, and then act.
This post was first written on Watermark Consulting by Jon Picoult
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