Keep profitable customers coming back for more

A couple check in to a hotel

Many firms don't know who their most profitable customers are, let alone how to keep them coming back to their business. In difficult times, customer loyalty may be your greatest weapon. Derek Bishop of Culture Consultancy explains how to get it, keep it and make it work for you

I often come across businesses that struggle to define which of their customers are actually their most profitable. Profitability isn't simply about measuring their level of spend within the business; if, for example a customer has unrealistic expectations of your service, they can become a drain on your customer service resources. This can result in a negative impact on the service you are able to deliver to your other customers.

This is why it is crucial to profile your customers and understand which ones are profitable and which ones may actually be costing you money. In the first instance, explore resetting the expectations of these demanding customers or consider a different charging structure, which means that you can afford to provide a higher level of service for them, hence retaining them but converting them into profitable customers.

Consider carrying out some customer research to understand how their priorities might have changed and what is now influencing their decision-making.

Address your customers' price sensitivity

As disposable income has dropped over the past few years, customers are more sensitive to price when making buying decisions. They need to consider whether they can really justify their spend. Organisations need to ensure they are delivering good value, and good customer service is a critical component in that.

Even with such price sensitivity, higher levels of customer service can make a huge difference to customers, with them potentially paying a slightly higher price just to have the confidence that they will be looked after that much better by you. Switching service providers to save a small amount of money may be considered not worth it by many customers, as they will be moving from current trusted service delivery to the unknown of a new provider.

How well are you servicing your customers?

It is worth looking at your existing customer base and asking how well you are servicing them and what more could you be doing for them. Do you have opportunities to improve your customer service?

For example, years ago I worked with a property alarm company who were hit by the impact of an economic slump. The construction industry was profoundly affected, so the number of new properties needing house alarms had fallen dramatically. The alarm company reviewed their existing customer base and identified those customers who were due a service of their alarm - they contacted these customers and reminded them of the need for the alarm to be serviced. They received great feedback and experienced a good take-up rate for the servicing.

A simple phone call to the customer has a positive impact and at the same time is a straightforward low cost revenue generator for the alarm company - win/win all round.

If you pay peanuts...

Many organisations fail to consider the potential impact on their customers when cutting costs, and whether a lower grade of service will encourage customers to leave. Before making any dramatic cuts, it is important to think through the customer experience and what it will do to the customer experience if you strip your costs.

Larger businesses will have an investment programme to improve their business. This might include improving service, launching new propositions or implementing new IT systems. With the strain on budgets,project costs may be cut. This naturally means that the scope of what's being delivered by the project is reduced.

When going through these de-scoping exercises, you will need to ensure that the elements you are reducing do not adversely affect the customer experience. If you don't pay attention to this you run the risk of confidently promising exceptional customer service, only to find that you cannot deliver.

When budgets come under strain, one of the first areas to be cut is staff training and development. It is critical to remember that the skills, capabilities and talents of the people are what will enable customer service delivery to succeed. Strong leadership skills within the senior team are also critical when tough decisions need to be made and staff kept motivated and fully engaged.

Make your customers your advocates

Word-of-mouth recommendations potentially carry even more significance when customers are looking for the best value for money. Ask how you can utilise the loyalty of your existing clients; would they be willing to become your advocates through a referral programme that rewards them for introducing new customers to your business, for example?

Making them feel special is by far the best way to help them become even more loyal and advocate you even further. The service you provide is the foundation to this.

Written by Derek Bishop of Culture Consultancy.

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