Think your relationship with your spouse, significant other, or best friend is different from your relationship with your cable provider, phone company, or favorite online retailer? Think again.
There’s great benefit in examining the strengths and weaknesses of your personal relationships when assessing your business strategies and goals. Think about what keeps your deepest relationships rock solid and what causes weaker ones to falter and eventually break. Lasting, long-term relationships, whether personal or professional, are built on a solid foundation that, when stripped of the details, are comprised of the same necessary building blocks: active listening, mutual satisfaction, security, honesty, and reliability.
The qualities that create lifelong partnerships and friendships are the same qualities that create customer lifetime value (CLV) in business relationships. Customer Lifetime Value is defined as profitable brand loyalty – the sum total of profit generated from a customer relationship over the lifetime of that relationship. There’s good reason more than 75% of North American senior executives say CLV is a highly or extremely valuable indicator – a CLV-supported strategy works to increase both retention and satisfaction rates, resulting in guaranteed recurring revenue year after year.
According to Forbes, the “power to gain revenue [is] from existing customers” because they will be the first to know about, buy, and recommend your new products or services. Customer retention then, not customer acquisition, is extremely valuable to CLV.
Businesses, especially those running a recurring revenue model, are like marriages – both parties are in it for the long haul. And like any good marriage, long-term business relationships are more coveted because they yield stability and consistency. A quick Google search on the top qualities of a good marriage returned articles from experts, including psychologists and counselors, that unsurprisingly all contained a combination of or all five qualities listed below.
So how do businesses turn a chance encounter into a lifelong partnership? First and foremost, there must be a solid foundation with a quality product or service that solves a need with added compelling benefits. Then, there needs to be a conscious effort to employ the aforementioned qualities in order to increase and maintain a high CLV.
Participate in Active Listening
The strongest bonds require constant communication. And while this may seem like a no-brainer, you’d be surprised how often dissolution is caused by a lack of two-way communication. Don’t just talk; remember to listen to what customers have to say. After all, they buy your product or service – their opinions matter and should be taken seriously. The most successful brands listen to their customers and take feedback into consideration for product updates or new releases.
For example, Server Density, a company that provides server monitoring for businesses, changed its linear pricing plan based on feedback that it was complicated and aligned poorly with customer success. Adopting a simpler, three tier pricing plan (starter, SMB, enterprise) resulted in a 100% increase in monthly revenue. While the number of free trial signups decreased by 25%, the number that really matters, the company’s bottom line, doubled as the new pricing plan sent away low-paying customers that may not be as serious as their server uptime.
Strive for Mutual Satisfaction
Satisfied customers are repeat customers. Repeat customers turn into loyal customers. And loyal customers continue to purchase your products or services and become advocates for your brand, often referring others your way. This never-ending customer satisfaction yields a business that continues to produce, upgrade, and innovate products and services for buyers and end users. Successful relationships are give and take so as long as you stay away from the give-give or take-take, mutual satisfaction ensures a strong, lifetime union.
Consider Zappos and its admirable 75% customer retention rate, made possible by the company’s decision to focus on retention through quality of service rather than new customer acquisition. The company understands that online shopping can be especially tricky when it comes to sizes since customers can’t physically try items on. To avoid dissatisfaction, Zappos provides as much information as possible about the fit (customer reviews also add insight) and offers an easy, free return policy. Additionally, Zappos focuses on a positive experience from beginning to end. The site promises delivery within five business days but ships majority of orders overnight. The under-promise and over-deliver tactic keeps customers satisfied and coming back for more exemplary service.
Provide a Sense of Security
Businesses with access to sensitive information are the most successful when customers can trust the business to keep their private information secure. How do you make customers feel safe? Make sure your business has the right procedures and technology in place to ensure that protection.
As more industries go digital, from retail to healthcare, companies must do their part to guarantee the security and privacy of sensitive customer information. Companies are addressing this concern by attaining the proper certifications and compliances for their respective industries, promoting products and services that are PCI-DSS (Payment Card Industry Data Security Standard) and HIPAA (Health Insurance Portability and Accountability Act) compliant, among others.
Tell it like it is, but tactfully of course. There’s no need to beat around the bush or sugarcoat the conversion. Straight talk is encouraged and welcomed so whether it’s an update, addition, or change, it’s important to let the customers know and give some additional background or information. This goes both ways as any business appreciates honest, direct feedback from customers. It’s simple really – say what you’ll do and do what you say.
Last year Chipotle, a popular restaurant chain, chose transparency when it labeled all the ingredients in its menu items, including GMOs. The move made Chipotle the first fast food chain to voluntarily reveal GMOs in its products. Customer reaction to the news did not affect company sales; instead, it prompted more trust from the customers according to Chipotle’s spokesperson.
A little spontaneity is great at times, but reliability ensures you can be counted on. Endless dropped calls, often at the most inopportune time, is reason enough for consumers to leave their mobile providers and run straight into the competitor’s open arms. Just as you quickly tire of a friend that constantly flakes on plans, an inconsistent business is often left looking for new patrons. Strive to be the one they can count on.
Amica Mutual ranked as the best auto insurance company by Consumer Search earlier this year based on its high customer satisfaction in auto claims. Though not as widely advertised as other auto insurance companies, Amica Mutual tops several customer-satisfaction surveys because customers can rely on its services, from the initial appraisal to the repair process.
Lifetime relationships aren’t impossible to find or keep as long as you put in the work. Similar to successful personal relationships, incorporating these five qualities into your retention strategy will positively affect and increase CLV for your recurring revenue business.
Let me know what you think. Is there anything you’d add or scratch off my list?