Your Customer Retention Rate Is Your Future Growth
Guest writer Debbie Frakes tackles the all-important topic of customer retention in her blog post this week, “Your Customer Retention Rate Is Your Future Growth.” We are often encouraged to attract new customers and can overlook the value of keeping customers for life. At Learning Without Scars, we can’t emphasize this enough. It’s so important to us, we have an entire class on the subject!
Finding new customers is great for business—they help you boost your sales and generate more revenue. However, retaining existing customers is even more important. Machinery dealers know that it is far more expensive to locate new customers than it is to keep the ones they already have. Although we all understand the concept, not all dealers actually use programs designed specifically to keep and develop their customers.
In this post we’re going to cover the six key retention drivers for growing your business:
- Retain Customers with a Satisfaction Program for continuous improvement
- Customer Internal Referrals more than double transactions each year
- Lead Flow with the right customers in the markets and industries you support
- Convert prospects predictably by selling what they purchase most often and saying “Yes”
- Engage your customers with consistent contact
- Measure and Forecast results
What is a customer retention rate?
Customer retention refers to the rate at which customers stay with your company for a specific period. The average customer retention of an equipment dealer business is 95.5% per month. Although that may sound very high, what that number actually means is that you are losing 4.5% of your customers each month. Over the entire year, you lose 54% of your customers!
On average, equipment dealers lose 51% of their customers each year. Only 29% of customers are retained for 3 or more years. Even though it looks like you are retaining most of your customers each month, you’re actually losing more than half of them throughout the entire year. And that pattern just makes business more difficult long term.
On the other hand, an improvement in your customer retention rate of just 1% each month represents a 12% increase in annual growth. The question is, how can you make that improvement?
How to boost your customer retention rate: a customer satisfaction survey
One of the best ways to improve your customer retention rate is to conduct customer satisfaction surveys. When they are conducted by a third party, these surveys allow you to learn about your customers and determine any issues before they turn into big problems. It’s important to have them completed by a third party, because customers tend to be more honest about a company if they’re not talking to someone from the company.
A customer satisfaction survey will help you understand your customers’ perspectives, why unhappy ones are unhappy, and how to serve them better. Plus, you’ll impress them by showing how proactive you are.
Using Winsby’s customer satisfaction survey program, our clients have seen 20% higher retention, 49% more customers, and 123% greater revenue growth over 5 years compared to those who are not using the program.
Customer internal referrals
Focusing on customer referrals means making sure your customers are buying everything from you—parts, service, rentals and equipment. Equipment dealers have multiple departments that are almost like different businesses. The good part about that, though, is that a customer can come in for a part, and then they become a potential customer for the service or equipment. The more they purchase from you, the better your customer retention rate will be.
How can you increase internal referrals?
- Understand customers’ expectations— turnaround time for parts and equipment deliveries and service protocols.
- Then, you can meet expectations, or manage them if meeting them isn’t possible.
- Always call the customer with updates before they contact you.
Ensure you have a consistent lead flow
Another critical piece of improving your customer retention rate is properly managing your lead flow. Your sales reps need to identify customers at risk consistently, then contact and engage them. At risk customers are current customers that you’re in danger of losing. These are people who start purchasing less and less from you, and eventually they could go to one of your competitors. Customers that are at risk typically haven’t purchased from you in over eight weeks. By reaching out to them, you can encourage them to come back to you to fulfill their needs.
Engage your customers and convert prospects
You should also be regularly sending out emails to your customers and prospects. In our experience, customers on an email list buy two to three times more often than those who are not receiving marketing emails. By putting your brand, products, and services in front of customers, you’ll stay top of mind and your retention rate will increase.
First, call customers and prospects to confirm decision makers’ emails to expand your list and keep it current. Then, send emails at least twice a month and show all your capabilities: parts, service, rentals, new and used equipment. It’s also important to identify your website visitors. Distribute leads who engage with your emails or website to your sales reps automatically to reach out to and determine what they need.
Plus, when you engage with customers, always answer your phone and always say “YES!”.
Measure and forecast
It’s important to look at your past to predict your future. When it comes to improving your customer retention rate and achieving consistent growth, you have to have an idea of where you’re at and where you’re headed. At Winsby, we forecast the growth of Active Accounts for the next 12 months, based on patterns during the past 36+ months, by branch and by department. You’ll learn:
- Expected losses and gains of Customers
- Expected number of transactions
- Expected revenue
You can then use the forecast to develop a plan of the action to take to improve your customer retention rate.
Retaining your existing customers is just as important (if not more important) than gaining new ones. Use all the tools at your disposal: customer satisfaction surveys, internal referrals, email marketing, consistent lead follow up, and always trying to say “yes” to your customers.
If you want to increase your customer retention rate and take advantage of all your possible tools, then contact Winsby today! We’ll help you implement a plan quickly. Contact Winsby Today.