Replacing customers who you’ve already lost and retaining your existing customers are interchangeable strategies, because one customer is not just like another.
Let’s take a closer look at the actual cost of losing customers and replacing them:
- First of all, it is not guaranteed that you will be able to find a replacement for each customer that you lose. A bird in the hand, after all, is worth two in the bush, even when the economy’s booming. Even in the best of times, you can’t be sure of the factors which may affect the rate at which you can bring in new customers: new competitors moving in down the street, changes in customer taste, even changes in traffic flow. And in hard times, you can’t take anything for granted.
- Then there’s the cost of actually bringing in a new customer. Some customers do just walk in the door on their own, because they saw your store, and though they’d give it a try. But enough to make up for your annual losses? Probably not – by a long shot. You need to advertise, just to let potential customers know that you’re there. And to draw sufficient numbers of new customers, you’ll probably need promotions and fresh marketing campaigns – which cost money. If you’re using that money to expand your customer base, you’re ahead of the game. But if you’re using it to make up for your losses, you’re running just to stay in the same place.
- There’s also time. The money that you invest in acquiring new customers doesn’t get paid back immediately. It takes time for new customers to become profitable.
But with existing customers, you’ve already paid the cost of bringing them into your store, so they are already paying for themselves.
We’ll take a further look at the cost of customer replacement in the next post, but for now, you might want to keep this in mind: part of the value of using customer service satisfaction surveys and having pro-active customer retention programs lies in the fact that you don’t have to face the kind of costs and risks that we’ve outlined above just to maintain your existing level of customers.
Services such as ALR’s system for customer relation management pay for themselves several times over simply from the money that you’ll save by keeping your existing customers, rather than having to replace them. And that doesn’t even count the positive value that you’ll get from maintaining customer loyalty.
If you would like to know more about how the ASK LISTEN RETAIN System or how it can help create customer retention and loyalty, please contact us.