Retain Customers by Building Community

 

While some may think that an annual customer retention rate of 80% is good, that means you loose one out of every five customers each year. Theoretically, this translates to 100% turnover every five years. And, as most business owners know, it is much more cost effective to retain a current customer than to acquire a new customer.

There are many approaches to retaining customers. Frequency programs purport to do so as do other customer loyalty programs. CRM systems are supposed to help with this. Some companies try to lock customers in through multi-year contracts and automatic rebilling. But the best approach to customer retention is community building because community building creates emotional connection and stickiness. People stay with the brand because it has created a community for them.

Think about how powerful coffee klatches, book clubs and bridge groups are. Imagine if you could create that type of community with your brand's customers.

So, what are some community building techniques?

• Producing user conferences.
• Creating customer advisory boards and customer steering committees. 
• Engaging customers through Facebook pages and other social media platforms.
• Holding customer meet-ups.
• Creating local brand-focused customer clubs.
• Creating physical spaces where customers can interact.
• Holding customer holiday parties and appreciation events.
• Recruiting panels of customers to beta test your new products.

Hallmark sponsors local Hallmark ornament collectors' clubs. Tesla Owners Clubs hold frequent owner meetups. Many wealth management firms hold holiday parties for their clients. Orvis offers free fly tying and casting clinics for its customers. Robert Graham offers exclusive closed door events for people who achieve Master Collector status within their Collector's Club. Most colleges and universities invite their graduates back to reunions every five years. Large churches create small groups focused on different interests to retain parishioners. Patagonia supports grassroots groups working to find solutions to the environmental crisis. Eastern Mountain Sports encourages people to share their outdoor photographs on Instagram with #goEast. SONY's Playstation has create an online space for gamers to connect. Harley Owner's Group (HOG) has more than one million members and holds HOG Rallies around the world. P&G created "Being Girl" as a resource for teenager girls to connect and find answers to the difficult questions that growing up entails. Lululemon's brand community offers free yoga classes, festivals and events and even an experiential store in Chicago featuring fitness studios and a juice bar.

If you want to retain more customers, identify and implement ways to create community among those customers. 

Customer Retention Issues

Some organizations have sought our help with customer retention. When calculating the cost of customer turnover, one must consider customer acquisition costs. If customer retention is brief, the value of the average non-retained customer may actually be less than his or her acquisition cost. What are some of the reasons for high customer turnover?

• You have targeted the wrong customer.
• You have targeted the right customer but your customer acquisition strategies and tactics have attracted other less attractive customers.
• Your sales force has been incented to acquire customers regardless of their profitability or suitability for your brand.
• You misrepresented the brand to prospects.
• You have not adequately reinforced your brand’s value proposition to the customer.
• You are not properly managing the customer relationship at critical points of change or disruption.
• You have not created an emotional connection between your brand and its customers.
• Your brand’s products or services are inferior to competitive alternatives.
• You have system or process failures that negatively impact the customer.
• Your system or process failures unintentionally terminate the customer relationship.
• You do not listen to your customers.
• You do not anticipate your customer’s needs.
• You mistreat the customer in some way and do not adequately redress the problem.

Discovering the specific source or sources of customer turnover is 90% of the solution. I wish you every success in increasing your customer retention.

Brand Aid, second edition is available here now.

Customer Retention

Are you having customer retention problems? Is it difficult to meet your growth goals when a significant portion of your business development efforts is used to replace lost customers?

It is much more expensive to attract new customers than it is to retain existing ones.

It is time for some organizational soul searching. Why are customers leaving? What is not compelling about your brand’s value proposition?  What is not working for them? What are you doing wrong? What could you do better?

One can use a combination of qualitative and quantitative research to understand what is going on. At a minimum, you want to talk with these three groups:

1. Current customers
2. Former customers (people you were not able to retain)
3. Competitors' customers

For the first group, you will want to explore the following:

• Attitudinal loyalty to the brand
• Emotional connection to the brand
• What they like about the brand experience
• What could be better
• Rate the brand’s delivery on a variety of potential customer benefits

For the second group, you will want to explore:

• How long they were customers
• Why they left
• Why the brand ceased to hold their interest
• Whether they have gone to a competitor or left the category altogether
• If they have gone to a competitor, what they like better about the competitor

For the third group, you will want to explore:

• Attitudinal loyalty to their brands
• Emotional connection to their brands
• What they like about their brand experience
• What could be better

For all three groups, you might also want to explore perceptions of the brand's personality.

Once you have gathered and analyzed this information, you will need to develop and commit to an action plan to solve the identified problems and create a stronger value proposition and delivery.

Good luck!