Many businesses tend to spend much of their time and money acquiring new customers. In that process, they often overlook their best source of growth, which is not in attracting new customers but rather in retaining and growing their existing customer base. When businesses are searching for ways to improve their bottom line they would do well to focus their energy on customer retention. It costs a lot less to keep a customer or get a new customer by word-of-mouth than it is to win a new customer. Case in point. A business whose model is based on monthly recurring sales (such as the cell phone, cable or insurance industries) found that historically their customers stayed an average of two-and-a-half years. Meanwhile, the customer acquisition cost for that business to just breakeven was nearly two years. If that business were to retain all of its customers by just one additional month on average, it would achieve an additional 3% of annual growth. If it retained its customer base for four additional months, it would create double-digit growth…. without adding a single customer. Clearly, keeping a customer even a little longer would be much better for that business than landing a new customer. That is true for most businesses.
If customer retention is the key to a better bottom line, what does it take to keep customers happy? Loyal? Some think that delivering a good product or service on time at a good price should suffice. Think again. Competition being what it is, delivering a good product or service on time at a good price is just the beginning. It takes more than that to keep a customer long-term. On the other hand, where companies go wrong is in thinking that it takes grand gestures and big efforts to retain customers. Actually, research shows that often it’s the littlest things that have the biggest impact. The key is to focus on the little things.
Little Things That Go A Long Way
It is important to understand that companies must at least be doing the basics right: deliver a good product or service; provide it on time; offer the product or service at a fair price based on the current market; and stand behind any product or service sold. Beyond that, it’s the little things that win the hearts and minds of customers… and create long-lasting loyalty. Here are some ‘little things’ that deliver a big return in customer loyalty.
1. Customers like to be referred to by name.
Three decades ago, there was a program called Cheers. The theme song of the program said it was a place “where everybody knows your name….” It turns out that they were onto something. Apparently, people do like to hear their own name. Using functional MRI, brain activation patterns were examined in response to a person hearing their own first name in contrast to hearing the names of others. There were several regions in the left hemisphere that showed greater activation when hearing their own name (than the names of others), including middle frontal cortex, middle and superior temporal cortex, and cuneus.
More importantly, this heightened brain activity was also connected to having a very positive effect on the business-customer relationship. This was seen across a variety of situations in dealing with customers.
- Remembering and using a customer’s name makes the customer view the person helping them in a better light. Customers assume the person they are dealing with at a business is more competent if he/she knows their name.
- Customers also open emails with more consistency if their name is included in the salutation.
- Customers also tend to like the person they are dealing with more if that person uses their name a few times during conversations. Of course, there is a law of diminishing returns. Saying the name too much sounds weird and fake.
2. Customers like to be thanked for their business.
Using a customer’s name is good not only on the phone, in person and in emails, but also in personal thank you notes. Some might think that thank you notes are passé. But actually technology has made the handwritten note so old-fashioned as to be cool again. It can be argued that the lost art of a hand-written thank you note is retro chic and can have an even bigger impact today than it would in years past, especially from a business. This is especially true for premium businesses.
3. Customers prefer friendly service over fast service.
When it comes to customer service, speed does not trump sociability or scrupulousness. A Gallop study showed that when it comes to the kind of memorable service that people would tell their friends about, it was more important that the service provided felt friendly and thorough rather than quick. This was especially true for premium services such as a CPA preparing a tax return, a dentist performing a procedure, or financial help from a banker.
Even in routine services – such as being waited on at a restaurant — and even when customers are impatient, quality service is deemed more important than fast service. Customers tend to remember the quality of service they receive—even more than they remember the food! If customers think a restaurant’s staff is friendly and courteous, they’re more likely to feel a personal connection to the business. This personal connection makes customers more willing to overlook things like longer wait times. Indeed, quality service, more than speed, is what turns one-time customers into regulars. If a customer deals with staff who are rude, impolite, or just plain bad at their jobs, they’re not likely to return. In fact, RightNow’s 2011 Customer Experience Impact Report found that the #1 reason customers would abandon a brand was due to rude customer service, which was cited 18% more often than slow or untimely service.
4. Customers appreciate when a business goes above and beyond, even in small ways.
Customer service guru Ross Shafer – a frequent traveler — tells the story of how Marriott International wowed him with something as pedestrian as a can of Coke. Mr. Shafer was doing a series of speaking engagements and arrived at a Marriott hotel late one night after a week of stops. Walking into his hotel room at midnight, hungry, thirsty and tired, Mr. Shafer ordered a burger, fries and a Coke from Room Service. When Room Service arrived with his food 20 minutes later, he looked at his tray and saw a beautiful, big juicy burger with all the fixings and a pile of golden French fries. The food was hot and appetizing. But instead of a Coke, the Room Service Waitress had brought him a can of Pepsi. Mr. Shafer, a loyal Coke drinker, did not want the can of Pepsi. He asked her if she could please swap that for the Coke he ordered. She apologized and said that, due to a convention, the hotel kitchen was completely out of Cokes. She suggested he try to squeeze a lemon in the soda to make it taste more like a Coke, but he did not like that solution. Since he also had a glass of ice water, he just accepted the tray of food and water. The waitress left. Two minutes later, there was a knock on his door. When he opened the door, the Room Service waitress was back, holding a can of Coke. He was very puzzled and wondered where she had gotten that Coke if the hotel kitchen was out. She explained that there was a soda machine on the Fourth Floor of the hotel and she had purchased one there for him.
Mr. Shafer was very touched by her small gesture. He tried to give her the money for the soda — which she had paid for out of her own pocket — but she refused. He asked her name. After she left, Mr. Shafer called the hotel manager to share the story and praise her service. Mr. Shafer went on to write a letter to Marriott International about the extra step she had taken to satisfy his specific request. Since then, Mr. Shafer has told that customer service story a multitude of times, given that he travels the country lecturing about customer service. The story was included as a chapter in one of his books, and is a segment in one of his customer service videos. When Mr. Shafter went back to find this woman at the Marriott hotel some time later to give her a copy of his book and video, he learned that she no longer worked at that hotel. She had been offered a management job with one of Marriott’s properties at another location. Buying Mr. Shafer a Coke cost her $1.00 and a few minutes of her time but that small gesture went a long way in reinforcing Mr. Shafer’s loyalty to Marriott (which as a regular business traveler is very important to the Marriott brand) and also has gotten Marriott a ton of good publicity from the retelling of the story in his videos and book. It’s the kind of story that brands desire… the kind of story that goes viral. (It also got her a promotion… and probably a raise.)
For those that think that such gestures only happen in the hospitality industry (which is, after all, supposed to be focused on service), think again. All kinds of companies are stepping up to do the extra little things for their valued customers. At Rackspace, a managed hosting and cloud computing company, an employee was on the phone with a customer during a marathon troubleshooting session. The employee heard the customer mention to someone in the background that they were all getting hungry. The employee briefly put them on hold and ordered a pizza to be delivered to the client’s location. Thirty minutes later, they were all still on the phone working on the problem when the pizza delivery person knocked on the customer’s door. Rackspace’s employee told them to answer it because he had ordered them a pizza. They were delighted and surprised.
While the cost and the time involved in the gesture was really quite small compared to the value of the customer to the company, with that small gesture, Rackspace generated tremendous good will for the organization. The employee was not just ‘a nice guy’ (although his gesture was very kind). His actions were a reflection of Rackspace’s award-winning Fanatical Support® program which is focused on helping customers successfully architect, deploy, and run their most critical applications. Their VP of Customer Care David Bryce coined the term “Fanatical Support” to encapsulate their customer service philosophy. The fact that Rackspace was founded in 1998 and now hosts hundreds of thousands of customers worldwide—including over 40% of the Fortune 100— and the fact that they even have a Vice President of Customer Care are both testaments to their dedication to customer satisfaction.
5. Customers love small gifts, freebies and little surprises.
It is no surprise that people like getting things for free. They like them even more when they are viewed as “favors,” but they especially love receiving these favors as surprises.
Like the Rackspace clients who loved the surprise free pizza, that was sent as a kind gesture (or favor), small acts of kindness go a long way to leaving a lasting mark.
A lot of companies are adopting such strategies. Zappos, known for its excellent customer service, automatically upgrades all purchases to priority shipping without even mentioning it to their customers on their website. Why do it and not say so? Zappos’ management understands the benefit of surprising people with a next day delivery. The cost of this automatic upgrade is paid back multiple times over with the customer loyalty they generate.
On Spotify, Greg Ciotti from HelpScout posted another great example of a company going above and beyond with a small, surprise gesture… to him. Mr. Ciotti explained how the team at UserTesting.com – a company he has worked with — asked him for his home address out of the blue one day. About a week after giving them his address, he received a package in the mail filled with delicious beef jerky… the exact brand of beef jerky that Mr. Ciotti loved to eat. Given that Usertesting.com is a software testing company (not a beef jerky company), Mr. Ciotti found it odd that they mailed him beef jerky. Mr. Ciotti had not told them about his love of beef jerky. However, he had mentioned on Twitter kiddingly that his taste in expensive beef jerky was making a financial dent in his wallet. Apparently, Usertesting.com’s marketing strategist remembered seeing that tweet and used it as a way to connect with Mr. Ciotti in a very personal – but also surprising — way.
While the prevailing wisdom of today’s fast-paced world is “don’t sweat the small stuff”, in the world of business, sweating the small stuff is what separates good companies from great ones. The small stuff is what turns today’s customer into tomorrow’s raving fan. The small stuff is what inspires customers to refer a business to a friend or come back again and again. Companies that want to differentiate themselves from the competition and want to dazzle the marketplace should definitely “sweat the small stuff”. The magic of customer retention and loyalty is in the details.
Quote of the Week
“There is a big difference between a satisfied customer and a loyal customer.” Shep Hyken
© 2014, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.