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Strong Customer Relationships: More Powerful than Satisfaction for Retention

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The Challenge: As companies grow, relationships with customers usually suffer. Larger customer files, heavier account loads, and less available time, often contribute to a decrease in engagement with customers. This begins the cycle of increasing losses of customers.

Findings from research conducted by our company ERDM indicate that engaging and forming strong relationships with customers has 12 times more influence on retention and repeat purchases than customer satisfaction. Satisfaction is now a minimum expectation.

As DMG Consulting says in their Microsoft-sponsored white paper, "In an era of intense competition, the customer experience is often the main differentiator between commoditized products and services." In today's consumer-centric business world, customers dictate the rise and fall of companies, and your business is completely dependent on keeping your customer relationships strong.

The key starting point for retention is understanding the state of customer relationships. Luca Paderni, VP and principal analyst at Forrester Research, says, "CMO's and their peers... must understand what customers represent for the whole organization to help shape the strategy for the overall business."

Once understanding is achieved, the next step, according to Walker, is closing the loop. This begins with setting alerts that indicate low customer loyalty or negative behavior, usually in the form of survey questions. After alerts are designed, a feedback system is created to ensure the information gets to someone who can act on it. There should also be follow-up protocols in place that allow staff to act on customer concerns, complaints, and opportunities accordingly. Finally, results should be documented, so the company can understand what works best and fine-tune accordingly.

This correlates with our findings, as well as the strategy used by Microsoft in the aforementioned white paper, that changing from relationships based on customer satisfaction to relationships with deeper levels of engagement -- based on more in-depth understanding of their needs -- increases customer retention drastically over the course of the customer lifecycle.

KEY TAKEAWAYS FOR MARKETERS

1. Assess the state of current customer relationships.
Learn if you're doing enough to meet customer expectations, and form deeper relationships with customers across multiple channels. Customers don't just want to be satisfied, they want to be engaged.

2. Develop strategies for following up.
Create a system that will seek out red flags, notify appropriate staff members at the right time, acquire customer feedback, and use that feedback to enrich and improve customer experience.

Ernan Roman is President of the marketing consultancy, Ernan Roman Direct Marketing.
Recognized as the industry pioneer who created three transformational methodologies: Integrated Direct Marketing, Opt-In Marketing, and Voice of Customer Relationship Research.

Ernan was recently inducted into the Marketing Hall of Fame.

Clients include Microsoft, NBC Universal, Disney, Hewlett-Packard and IBM.

2010-12-08-ernan.jpgErnan was named to "B to B's Who's Who" as one of the "100 most influential people" in Business Marketing by Crain's B to B Magazine.

His fourth and latest book on marketing best practices is titled: Voice of the Customer Marketing: A Proven 5-Step Process to Create Customers Who Care, Spend, and Stay.

Ernan is also the co-author of "Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing" and author of "Integrated Direct Marketing: The Cutting Edge Strategy for Synchronizing Advertising, Direct Mail, Telemarketing and Field Sales."

www.erdm.com
ernan@erdm.com