Customer Retention: The First Step to Growth

Ask yourself, how can you increase sales if many of your existing customers choose not to buy from you again? How can you be better at keeping existing customers? How do you retain 100% of the customers you want?

The answers to these questions come down to down to two basic functions you must do correctly:

1. communicate well with your customers and
2. discover their needs and complaints.

If you want to grow your business, you must start by keeping your current base of customers. In a multi-industry study by the University of Pennsylvania’s Wharton School of Business, researchers found that companies who manage to reduce their customer attrition by only 5 to 10 percent actually increased their profits by 25 to 75 percent, depending on the industry.

The key to keeping customers is to

1. identify unhappy customers early and serve them better, and
2. build your internal systems to exceed customer expectations every time (avoiding unhappy customers from forming). The U.S. Office of Consumer Affairs commissioned a study some years back on U.S. consumer behavior. The results told us a lot about the level of unhappy customers typically within a business’ customer base:

• 96% of all unhappy customers never tell the business
• For every complaint received, the typical business has 26 customers with problems, of which six are “serious”
• Complaining customers are more likely to do business with the company even if the problem isn’t satisfactorily resolved
• Of the customers that complain, between 54% and 70% will do business again with the company if the problem is resolved satisfactorily, 95% will return if the problem is resolved quickly
• The average customer with a complaint tells ten people about it and 13% tell more than 20 people
• Customers who have their complaint resolved to their satisfaction tell five people about the positive treatment they received

Businesses where customers rate their service above average yield net profits on sales that are 11 times greater than businesses whose customers rate them below average. These businesses grow twice as fast.

The study tells us a great deal:

• the complaints you hear are probably just the tip of the iceberg
• encourage complaints and devise system to discover problems, and
• resolve complaints quickly

So Why Do Customers Leave?
If retaining customers is the foundation upon which to grow a business, why don’t companies do more to retain them? That begs the question, why do customers leave?

Ron Zemke, author of Knock Your Socks Off Service and other books, states that client satisfaction is the result of two important factors: Outcomes and Process. Outcome is the result of using your product/service for the customer. Did they like it or dislike it? The Process is the interaction the customer had with your company. How were they dealt with by your company? How easy was the process? Zemke diagrams thee two levels of satisfaction in a model (see below) where two-thirds of the potential positions are negative (Gone, Searching or At Risk).

The goal according to Zemke, is to move all of your customers to the upper right corner, Advocates. The more customers you have in this corner, the more stable your base of customers is and the more successful your company will be. An important lesson from the Zemke model is the idea of understanding customer outcomes and process expectations. If you can positively influence or even help set customer expectations in such a way that you can exceed them, you will do better.



If you meet expectations for outcomes but the customer is dissatisfied with the process, your customer searching for someone else. Therefore, it is vital not to focus on customer service and product/service quality but also on how these two factors create an entire customer perspective of your company.

Try this exercise. Map out every point of potential interactions with customers and evaluate your performance from the perspective of a customer. How are you doing? Make improvements where needed.

The impressions you make are vital to your business’ success. If you need to improve customer retention, give Next Level a call, we can help.

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