Retaining existing customers and developing long term customer relationships have long been recognized as a driver of profitability, and yet many firms are stuck in the “steak” of conventional marketing and sales efforts, perks, and loyalty programs. The money is in the “sizzle” of the strategic relationship, not the sales relationship. Let’s put some sizzle into your bottom line!
Three Ultimate Secrets to Long Term Customer Relationships
1. Identify WHO you want to retain.
One of the workshops I do with clients is The Customer Profitability Diamond, which identifies your “who’s who” of profitable customers vs. those you’re losing your shirt on. It’s not a conventional accounting exercise, but instead identifies customer behaviors you can influence, and self-inflicted wounds you can eliminate to improve profits and manage your long-term customer relationships.
I believe we want to retain every customer who helps us achieve our profitability goals as we help them achieve theirs… with only one exception. Abusive customers who are taking a toll on your staff should be exited quickly.
Until you know who’s who in terms of your most valuable customers, not based on revenue but based on profit, you don’t really know how to manage your time so that you’re investing in building long-term customer relationships with the most crucial customers and best partners who are keeping you in business.
Most leaders think their “biggest” customers deserve that honor. I’ve seen a lot of those big revenue customers end up in the abusive and unprofitable end of the Customer Profitability Diamond. Your time is scarce; you need to know who to spend it with before you start building long term executive-level customer relationships. Take 20 minutes to watch this video and learn how powerful the Customer Profitability Diamond is.
2. Build a proactive customer loyalty and retention plan.
I’ve written many a blog post on the 5Rs or proactive customer relationship management, but it always bears repeating because I still find that many executives are locked into outdated sales models. It’s simple. Once you’ve created your Customer Profitability Diamond, you can create what I call an A.C.R.E.S. of Opportunity Action Plan to target 5 categories of customers.
A.C.R.E.S stands for Align Customer Relationships, Engagement & Service, and it’s a powerful tool to identify the time, effort, and investment required to properly serve each category:
- Your most profitable customers, whom you must R when it comes to customer loyalty and retention, these customers are make-or-break for your business.
- Marginally profitable customers where there are low-hanging-fruit opportunities to Ramp up their level of business with you, and improve customer loyalty by serving more of their needs.
- Customers currently costing you more than they’re worth, whom you can Restore to breakeven or better. Most often you can get them turned around because often self-inflicted wounds are the cause of the profitability issue. However, there’s no value to retaining existing customers who continue to cost you more than they’re worth.
- Lost customers who will do business with you again when you implement a Regain strategy. One of the most overlooked strategies in retaining existing customers is going back to those you’ve lost! The grass isn’t always greener with their new vendor.
- Inactive customers who may be “dead or just sleeping” and need to be Reactivated are another keystone in building long term customer relationships because often there’s a reason they’ve gone quiet, possibly because you’re “out of sight, out of mind”. And it’s a simple strategy to implement and see results.
In next week’s blog post, I’ll take you through all 5 of these in more detail.
3. Get inside your customers’ heads to excel at retaining existing customers.
You need to invest some executive time with your Retain, Ramp Up, and Regain customers to understand how to create the kind of value that keeps them coming back again and again. Once you understand how to save them time, save them money, solve a real problem, create a feel good, or provide peace of mind, you can skyrocket customer loyalty and retention. Best of all, while many leaders find this part daunting, you can actually achieve tremendous results in less time than you’re spending on email.
I train clients in the lost art of having Value Creation Conversations (VCCs) – which are similar to how shopkeepers in the wild west improved customer loyalty by really understanding what their customers needed, and then finding a way to get it to them. Many times when I’m speaking I reference the example of Sam Palmisano, former CEO and Chair of IBM, who met with a customer every single day of his tenure, NOT to sell servers and PCs, but to build relationships by creating value and long-term customer relationships. Check out this 3-part video series to learn more about how to do a VCC with a client just once each week (in less time than you’re currently spending on email every day), and see how straightforward it is to get inside your customers’ heads, create value, and retain them longer.
The first step in building long term customer relationships is to decide whom you most need to solidify your relationships with. Then, activate your 5Rs of proactive customer profitability management. Finally, invest some executive time to get inside their heads. Your sales team is responsible for selling the products and services you have today. You’re responsible for figuring out what customers will want to buy tomorrow.
Drop me a note below and tell me which of the Rs will be YOUR highest priority this month?