Monthly Archives: June 2009

In a previous post I remarked about companies that view customer service as a cost.

Even if service is a cost, various studies still show it to be more effective than sales and marketing costs (as much as 5x, 7x, or 10x).  That is, it costs 7 times as much to acquire a customer as retain one.  So it is interesting to read blog posts that call retention the “new acquisition”.

I’m not arguing with the thought that retaining customers is a good idea.  Heck, it’s a great idea.  But retention and acquisition are part of the same continuum.  You can’t treat them as separate.  When a sale is made, it is largely because the prospect/customer believes they will get value from your service.  But after the sale the customer has to live with that decision.  If they aren’t satisfied, what happens?

Customers Leave – For some products the consumer leaves forever.  If the first impression is a bad one, don’t count on getting a second impression.

Buyer’s Remorse – If the experience is bad enough, you may get the product back, along with a demand for a refund.  Time and money – not good.

Word-of-Mouth Marketing – Unfortunately, this isn’t the kind of marketing you want for your company or its products.  These words will be loud and passionate.  And in the internet marketplace, these words carry the extra poison of being public.

Competitors are always looking out for chinks in the armor.  If you fail to protect your position through exceptional customer service, your customers begin to think, “what have I got to lose by switching?”

Great companies realize that customer expectations must be met continually.  Just like stock performance, no one cares what your past results were.  In retaining customers we acquire them again and again.  While acquisition is a one-time activity, retention is acquisition done perpetually.

Perpetual acquisition is possible through great service.  And great service is much easier with great products.  When it comes to product development, there are two types of companies.  Those that develop with the intention to sell once (and move on) and those that develop to sell many times and retain for a long time.  Simplified, the latter are those that design with customer satisfaction in mind as a goal.  Those companies outpace and outlast those that consider satisfaction a necessary evil.  For these companies the experience is the opposite!

Customers Stay – With good service customers may even forgive bad products.

Buyer Loyalty – If the experience is bad enough, you may get the product back, along with a demand for a refund.  Time and money – not good.

Word-of-Mouth Marketing – Happily this exposure is exactly what you want for your company.  Hopefully these words will be loud and passionate.  Now you stand to benefit from widely available praise for your commitment to excellence in all you do.  Now, instead of worrying about bad first impressions, you’ll benefit from customers recruiting new customers for you!

The pivot point of retention is that it keeps customers you worked hard to acquire and it creates momentum so existing customers sell new customers for you.  Sure, retention costs money, but not as much as new sales!