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How to Increase Profitability by Retaining Customers

By - Jul 06, 2017

How to Increase Profitability by Retaining Customers

Increase Profitability by Retaining Customers

Last week I shared the 5 fundamentals of sustainable business growth and this week I wanted to expand on one of those points – how to increase profitability by retaining customers. Have you heard of Pareto’s Principle? It states that businesses get 80 percent of business from 20 percent of their clients, proving that retaining these customers is crucial to your firm’s success.

In the long run, you can greatly improve your customer base if you focus more on retaining your customers than spending your marketing budget funds on desperately trying to attract new customers. It isn’t just me who thinks this, Bain Co. states that a 10 percent increase in customer retention is equal to a 30% increase in company value.

But how do you do it? Here are 4 tips to increase profitability by retaining customers.

1. Always think of relationships.
The most crucial of these tips, be thinking of relationships from the start and set customers’ expectations early. How you do it will be different depending on your industry, but think of it in terms of delivering faster or more than promised. Respond at lightning speed to questions and comments whether by email or social media. Exceeding expectations when it comes to communication and commitment will go far in retaining customers.

Make sure you are reaching out to your customers regularly, provide them with value and information that will empower them in relation to your niche. Blogging and social media are other powerful tools that allow you to disperse your knowledge and passion and also leads into the second tip…

2. Ask the customers.
We all know the old saying, “the customer knows best”, but I think that should be taken a step further and customers should be included in all decisions. Asking customers what they think about a decision helps to keep them in the loop and also ensures that you are always considering what is best for them.

If you are planning on making any changes in your operations or strategy, it will be a lot more successful if endorsed and celebrated in advance by your customers. Plus you won’t have to go back to square one if they disagree! Send out a survey or utilize your blog and social media following, and really ask your customers what they think and what you can improve on.

3. Establish unique values.
As mentioned in this post, having an authentic purpose is key to creating sustainable business growth. When you have answered the question “Why do you do what you do?, the answer will guide your team through recruitment, customer management and product development and sales. Even more than that, sharing these unique values for which you stand ensures that the customers you are attracting also feel strongly about them. Know your potential customers priorities and communicate your values that match.

4. Don’t solely focus on sales.
Sales are important, obviously. But if you are trying to build a relationship that lasts beyond the initial sale, then you also need to think beyond it. Get personal! Don’t just see it as a transaction, instead go out of your way to try to know each person or client better. In a consultative style of selling, you should offer advice, let them know about complementary products and provide tips for maximizing the value of their purchases. When they trust that you are thinking more about what you can do for them, rather than what they can do for you, then they will ask for help openly and a meaningful relationship can transpire.

Customers like attention. Even just small tokens of appreciation (emails with customized offers, thank-you notes to returning guests and personalized greetings on special occasions) can make you stand out from the competition and win over the hearts of your customers. Very important if you want to increase profitability by retaining customers!

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