Many business leaders know that losing customers dramatically affects their top-line revenue. Yet often businesses continue to push new customer acquisition over current customer development and retention. Of course, a balance must be struck between the two, but as you consider where to invest your resources, it is important to understand these concepts:
1. Keeping just 5 percent more of your customer base can increase your business anywhere from 25 percent to 95 percent, according to Harvard Business Review. And decreasing customer defection (churn) by 50 percent can more than double the speed in which your company grows, according to research by Bain and Company's Frederick Reichheld and others.
2. On average two-thirds of the business revenue resides in existing customer accounts ("Cost of"). Existing customers are the easiest to up-sell and cross-sell to because they have already bought your product and believe in your company. Ensuring that they continue to see value in your products directly affects your bottom line.
3. Often business leaders focus effort heavily on new business, but it can cost anywhere from five to 10 times more to obtain a new customer than it costs to keep an existing customer happy ("Cost of").
4. Business leaders often prefer to throw resources at cold outreach, but happy customers can generate new customers for practically nothing. And according to Colleen Francis, founder and president of Engage Selling Solutions, referral business is far more likely to yield new customers than cold outreach.
5. Generally, customers attached to an annual contract churn long before a renewal conversation ever happens, and by then it is too late.
6. A great way to reduce churn and keep existing customers happy is to develop an early warning system that indicates customer needs in real time. Early warning systems cut opportunity costs for you and your team, allow your team to solve current customer issues before they become serious problems, and help boost your customers’ overall success.
With these ideas in mind, an increasing number of forward-thinking business professionals have begun to recognize the importance of their current customers and are working harder to keep them happy. They are expanding their Customer Success (CS) teams and monitoring the "health" of each customer with real-time, data-driven insights. With a clear understanding of their customers' needs, these business professionals are able to measure and maintain the value of their product for their current customers. As a result, they are seeing a positive effect on business growth. To them, the concept is simple: Keep customers happy; by doing so, you will persuade them to stay; and it's likely they will refer more customers to your business.
The idea of "Customer Success" is not necessarily new; however, using real-time technology to assist with gauging customer satisfaction is revolutionizing this idea. Measuring customer activity, product usage, help tickets, and other key performance indicators is critical to understanding the overall health of a customer and must be a part of the CS process. Successful business leaders use this data to create customer health profiles and health scores. These metrics help to ensure that the customer sees the value of the product early on and that the product continues to be relevant to their business in the future.
Customers are expecting increasing value from the products they buy, which is why data-driven CS products have seen significant growth recently. In order to keep customers happy, businesses need customer data gathered and translated so that their CS teams can quickly determine which customers need attention and immediately take action to prevent churn. That is precisely what these data-driven products do—they take much of the guess work out of ensuring customer success.
And since the sales process to acquire new customers can be costly, it's important to continuously provide measurable success to your existing customers. Business leaders should not underestimate the importance of CS and the ability to measure and maintain product value for your customers. Having real-time, actionable insights will help you keep your customers and your business in good health. After all, happy, loyal customers are your best customers, and your strongest referral source.