A Business Research Lab Tip
The Role of Surveys in Customer Retention Programs
It can take hundreds of dollars in advertising for some businesses to acquire each new customer. Surprisingly, many businesses focus exclusively on acquiring new customers, and expend little effort in retaining existing customers. A customer retention program consists of three main items:
- A focus on satisfying current customers,
- A means of measuring why customers leave,
- A planned effort to prevent customers from leaving once they express a desire to do so.
Perhaps you are lucky enough to know the names of your customers. If you do, and you are in a business in which your customers have accounts, you have an opportunity that other businesses do not; you can easily find out why your customers are leaving. This can be done through a closed account survey.
Such a survey can be implemented at the time an account is closed, or shortly afterwards. Some of the basic issues addressed in such a survey include the following:
How satisfied was the customer?
What is the customer's reason for leaving? Typical reasons would include:
- Poor service,
- Pricing,
- Change of address,
- Customer no longer has a need for the service,
- Customer received a better offer from a competitor.
For any of the above reasons for leaving mentioned by a customer, further questions would be asked to better understand the reason. For example, you would want to find out the specifics surrounding poor service, the actual price charged by a competitor, the specific offer received by a competitor, the name of the competitor to whom the customer is going, how they heard of the competitor's offer, etc. Armed with this information, you can formulate a customer retention program, which, depending upon the reasons customers are leaving, might consist of one or more of the following:
- A program to address service concerns to prevent additional customers from leaving,
- An evaluation of current pricing,
- An evaluation of competitors' advertising campaigns and determine whether a marketing response is warranted,
- Development of an "exit interview" (a specialized closed account survey) to determine why a customer is leaving and to attempt to prevent the customer from leaving at that time through "counter-offers.".
An effective customer retention program, which includes a detailed understanding of why customers are leaving, can generate more revenue for you than a large increase in advertising expenditures. For example, if you spend $50,000 to bring in 2000 new customers per year, it costs you $25 in advertising for each new customer. If you have a customer base of 8000 households and a 20% customer turnover rate, you lose 1600 customers per year, for a net gain of 400. If through a customer retention program, you can reduce your customer turnover from 20% to 15%, you'll retain an additional 400 customers per year and increase your net gain to 800. Without a customer retention program, this net gain of 400 would have required an additional advertising expenditure of $50,000.
A customer retention program doesn't have to be expensive. The costs would include a modest survey, a series of "scripts" written to entice customers to stay, a few moments of time on the part of each employee who closes accounts, and a modest counter-offer.
Do you own or manage a small business, or a department of a large business? Check out our special E-Value2003 Employee Satisfaction Survey, specially designed and priced for businesses with 1000 or fewer employees.
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