When Retaining Customers May Not Be a Good Idea

We know it’s far easier (and cheaper) to retain existing customers than it is to recruit new ones. But amidst the buzz surrounding customer retention, it’s important to remember that not all customers are worth keeping.

More customers generally means more profit. However, beyond a point, the marginal increase in profits per customer decreases. Increasing the customer base beyond a certain level may even be counterproductive, stretching the marketer’s resources in serving customers, and thereby putting off many loyal clients. The added resources needed to serve the new customer well may upset the entire business model. The additional customers may not sustain the extra resources required either, leading to erosion of per-capita profits. On another scale, some customers are simply too demanding, consuming a disproportionate amount of the resources for too little revenue. That’s why it’s imperative that companies focus their efforts on keeping the “right” customers.  Customers that are loyal, will continue to buy more and refer in new business.

There are many different ways to determine which of your customers are the “right” customers to focus on keeping.  Some companies just look at top line impact while other focus on profitability or the ones that call the least (remember Sprint’s public faux pas from a few years ago?) Walker is a company that has spent decades perfecting their Loyalty Index by which they apply their predictive analytics to information they capture customer by customer.

At the end of the day there are a number of ways companies can determine where best to focus their marketing and sales energy.  Then it comes down to the discipline to apply that strategy and focus on only your best customers.  Right On’s platform is used by a number of companies to centralize the data from many different systems (CRM, Website, Social, Email, Purchasing, …) so that companies can easily visualize and take action on this strategy, retaining customers and growing profitable relationships.