How to Implement Effective Customer Satisfaction and Customer Retention Strategies for your Company

customer retention strategies model How to Implement Effective Customer Satisfaction and Customer Retention Strategies for your Company

When it comes to growing their startups, many entrepreneurs are so focused on gaining new clients and customers that they fail to effectively address the need to retain those they already have. According to Marketing Metrics, the probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20%.  Research also shows that a 10% increase in customer retention results in a 30% increase in the value of the company (Bain and Co.)  Anyone working for a top Fortune 500 business knows that churn and customer renewals are critical metrics for the business.  Yet, many marketing plans are so focused on customer acquisition that they largely ignore customer retention.

Customer retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.

On the other hand, customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as “the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals.”In a survey of nearly 200 senior marketing managers, 71 percent responded that they found a customer satisfaction metric very useful in managing and monitoring their businesses.

Customer satisfaction is the key to customer retention. Fully satisfied customers are more likely to become loyal customers, or even advocates for the firm and its products. Satisfied customers are less likely to explore alternative suppliers and they are less price sensitive. Therefore, satisfied customers are less likely to switch to competitors. Satisfied customers are also more likely to spread positive word of mouth about the firm and its products. However, the way that customers think about satisfaction creates some interesting challenges for marketers. It is one thing to strive for the best in terms of quality and value, but how can a firm control the uncontrollable factors that affect customer satisfaction? Certainly, marketers cannot control the weather or the fact that their customers are in a bad mood. However, there are several things that marketers can do manage customer satisfaction and leverage it in their marketing efforts:

1. Regular communication with customized content and special offers. This is the cornerstone of any good customer retention program and careful attention should be paid here.  Most companies have some sort of newsletter tor email o communicate with existing customers but fewer are actively making offers to their current install base that are customized according to what is already known about the customer.  This can be as simple as offering an upgrade at a special price to tiered discounts or preferred access to support or other resources.

2. Understand what can go wrong. Managers, particularly those on the front line, must understand that an endless number of things can and will go wrong in meeting customers’ expectations. Even the best strategies will not work in the face of customers who are in a bad mood. Although some factors are simply uncontrollable, managers should be aware of these factors and be ready to respond if possible.

3. Focus on controllable issues. The key is to keep an eye on the uncontrollable factors but focus more on things that can be controlled. Core product quality, customer service, atmosphere, experiences, pricing, convenience, distribution, and promotion must all be managed in an effort to increase share of customer and maintain loyal relationships. It is especially important that the core product be of high quality. Without that, the firm stands little chance of creating customer satisfaction or long-term customer relationships.

4. Respond to messages promptly and keep your clients informed. This goes without saying really. We all know how annoying it is to wait days for a response to an email or phone call. It might not always be practical to deal with all customers’ queries within the space of a few hours, but at least email or call them back and let them know you’ve received their message and you’ll contact them about it as soon as possible. Even if you’re not able to solve a problem right away, let the customer know you’re working on it.

5. Manage customer expectations. As we have seen already, managing customer expectations is more than promising only what you can deliver. To manage expectations well, the marketer must educate customers on how to be satisfied by the firm and its products. These efforts can include in-depth product training, educating customers on how to get the best service from the company, telling customers about product availability and delivery schedules, and giving customers tips and hints for improving quality and service. For example, the U.S. Postal Service routinely reminds customers to mail early during the busy holiday season in November and December. This simple reminder is valuable in managing customers’ expectations regarding mail delivery times.

6. Offer satisfaction guarantees. Companies that care about customer satisfaction back up their offerings by guaranteeing customer satisfaction or product quality. Guarantees offer a number of benefits. For the firm, a guarantee can serve as a corporate vision, creed, or goal that all employees can strive to meet. A good guarantee is also a viable marketing tool that can be used to differentiate the firm’s product offering. For customers, guarantees reduce the risk of buying from the firm and give the customer a point of leverage if they have a complaint.

7. Have a clearly-defined customer service policy. This may not be too important when you’re just starting out, but a clearly defined customer service policy is going to save you a lot of time and effort in the long run. If a customer has a problem, what should they do? If the first option doesn’t work, then what? Should they contact different people for billing and technical enquiries? If they’re not satisfied with any aspect of your customer service, who should they tell?

There’s nothing more annoying for a client than being passed from person to person, or not knowing who to turn to. Making sure they know exactly what to do at each stage of their enquiry should be of utmost importance. So make sure your customer service policy is present on your site — and anywhere else it may be useful.

8. Make it easy for customers to complain. Over 90 percent of dissatisfied customers never complain—they just go elsewhere to meet their needs. To counter this customer defection, marketers must make it easy for customers to complain. Whether by mail, phone, e-mail, website contact form, or in person, firms that care about customer satisfaction will make customer complaints an important part of their ongoing research efforts. However, tracking complaints is not enough. The firm must also be willing to listen and act to rectify customers’ problems. Complaining customers are much more likely to buy again if the firm handles their complaints effectively and swiftly.

9. Create relationship programs. As we discussed earlier, firms can use relationship strategies to increase customer loyalty. Today, loyalty or membership programs are everywhere: banks, restaurants, supermarkets, and even bookstores. The idea behind all of these programs is to create financial, social, customization, and/or structural bonds that link customers to the firm.

10. Make customer satisfaction measurement an ongoing priority. If you don’t know what customers want, need, or expect, everything else is a waste of time. A permanent, ongoing program to measure customer satisfaction is one of the most important foundations of customer relationship management.

To develop your own strategy specific to your industry or company. You can use the Kano model.

The Kano model is a theory of product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano which classifies customer preferences into five categories:

1. Attractive

2. One-Dimensional

3. Must-Be

4. Indifferent

5. Reverse

Kano model showing transition over time How to Implement Effective Customer Satisfaction and Customer Retention Strategies for your Company

These categories have been translated into English using various names (delighters/exciters, satisfiers, dissatisfiers, etc.), but all you refer to the original articles written by Kano in Japanese.

1. Attractive Quality. These attributes provide satisfaction when achieved fully, but do not cause dissatisfaction when not fulfilled. These are attributes that are not normally expected, for example, a thermometer on a package of milk showing the temperature of the milk. Since these types of attributes of quality unexpectedly delight customers, they are often unspoken.

2. One-dimensional Quality. These attributes result in satisfaction when fulfilled and dissatisfaction when not fulfilled. These are attributes that are spoken of and ones which companies compete for. An example of this would be a milk package that is said to have ten percent more milk for the same price will result in customer satisfaction, but if it only contains six percent then the customer will feel misled and it will lead to dissatisfaction.

3. Must-be Quality. These attributes are taken for granted when fulfilled but result in dissatisfaction when not fulfilled. An example of this would be package of milk that leaks. Customers are dissatisfied when the package leaks, but when it does not leak the result is not increased customer satisfaction. Since customers expect these attributes and view them as basic, it is unlikely that they are going to tell the company about them when asked about quality attributes.

4. Indifferent Quality. These attributes refer to aspects that are neither good nor bad, and they do not result in either customer satisfaction or customer dissatisfaction.

5. Reverse Quality. These attributes refer to a high degree of achievement resulting in dissatisfaction and to the fact that not all customers are alike. For example, some customers prefer high-tech products, while others prefer the basic model of a product and will be dissatisfied if a product has too many extra features.

The Kano model offers some insight into the product attributes which are perceived to be important to customers. The purpose of the tool is to support product specification and discussion through better development of team understanding. Kano’s model focuses on differentiating product features, as opposed to focusing initially on customer needs. Kano also produced a methodology for mapping consumer responses to questionnaires onto his model.

This model is very dynamic by nature. Expected requirements may also become exciting after a real or potential failure. The focus on internal quality helps assure that expected requirements do not fall through the cracks and points out opportunities to build in excitement.

Each customized action plan seeks involvement at the client’s decision making process for a translation project. For instance, if you have a sales force that is scoping a translation process and need to set realistic expectations, you need to make sure that your action plan is to support the sales process wherever possible. Being involved in the decision making process helps you to understand the client specific requirements. It also provides an opportunity to bring in our perspective to set realistic expectations where it will have the most meaningful impact. The process also confirms that it is much more difficult for clients to address processes at the request stage since the project needs have already mostly been defined by then.

At the request level, it is important to be able to meet the current needs of the client. Therefore, you should also look at how current needs impact your workflow and where you can improve. You build relationships with your clients to understand and manage ongoing needs as much as possible so that you can plan ahead.

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