By: Melissa Wedman, CEO of Mollycoddled Hash Slinger
You may already know this (or maybe not), but the cost of acquisition for a new client, depending on your industry could be as high as several hundred or thousands of dollars depending how effective your marketing strategy is. Most companies know their exact CAC, but most don't know their cost of retention.
Let these numbers sink in for a minute-if you could stop just 5% of your existing clients from leaving your business; you could increase your PROFITS (not revenue) by 25-100%.
As the sales or business development professional who may receive commission on sales or as the Marketing Director, your role's success is often measured by NEW growth over retention (honestly blows my mind when I hear reps tell me that they receive NO commission or credit on retaining customers when retention is not only nearly direct profit but takes more skill and is vital to a company's long term viability). Customer retention funnels could certainly make your job no matter the role, more seamless and successful if you're not consistently on 'the prowl' for constant new lead generation.
There are many pieces to the puzzle when implementing a successful retention strategy (Does your company have a retention strategy? Or is the sales funnel the focus?), but the most overlooked yet most effective is: GIFTING. Why is it overlooked? Most likely the lack of budget created or how to view the budget for gifting as part of your marketing and sales department's budget. When you become willing to dig deeper on WHY gifting is the most effective retention tool, you may be more willing to create or expand a budget for the tool. Guess what, it doesn't have to break the bank either!
Take a journey with me on this thought process for a minute...
Now, I'm not saying that those aren't important pieces of your marketing strategy. However, they're not an effective part of your RETENTION strategy.
Still following? Okay, think about this--
When was the last time someone gave you an UNEXPECTED gift? You know, the neighbor showed up at your door out of the blue with a plate of homemade treats? Your spouse showed up with an unexpected gift? Your best friend knew you had a rough day and showed up with flowers or whisked you away to go have fun? How did it make you feel? I'm certain, you probably immediately felt a stronger connection with that person because the gift came from a place of sincerity. Why did these emotions and feelings occur when receiving an unexpected gift? Look up dopamine. Dopamine is a neurotransmitter and hormone released when something has happened and leaves us feeling happy. This 'chemical' communicates with the front part of your brain and is associated with pleasure and reward. It helps motivate you to work toward achieving a reward. Unexpected gifts leave you with a DEEPER CONNECTION and that builds a deeper RELATIONSHIP more often than not. Utilizing emails, 'cheap' promotional items and postal mail as a retention tool is almost impossible to aid in creating a POSITIVE EMOTIONAL CONNECTION to aid in retaining your current customers.
We know that there isn't a business in 2020 that is okay with being the 'norm'. The 'norm' ultimately leaves our business complacent and can eventually kill your business.
To emotionally deepen the relationship with your existing clients; you must do the unexpected in a world of the expected. Let me say that again, YOU. MUST. DO. THE. UNEXPECTED. IN. A. WORLD. OF. THE. EXPECTED. to stand out among the crowd.
Of course gifting is just one single piece to the puzzle in your retention strategy. Additionally, the overall customer experience and culture of your company from the top down are crucial. Wait, did I just say customer EXPERIENCE or customer service?
Let me explain-
Customer SERVICE is REACTIVE. When your customer has a PROBLEM, customer service is how you handle (or don't) the problem. Yes, this is an incredibly important tool in your retention belt. However, the customer EXPERIENCE must be at the foundation of your retention strategy. It's apart of your on boarding process within the marketing strategy and sales cycle. Have you read, "Never Lose a Customer Again" by Joey Coleman? Just do it. GREAT deep dive on how to truly create an unforgettable experience for long term customer buy-in with your company.
The customer experience is the EMOTIONAL tool (hello dopamine) to create LOYAL clients who don't just keep their business with you but they become advocates for you.
Are you doing anything right now to maximize points of emotion with your clients? Here we go again...do the unexpected in a world of the expected. The most overlooked tool? Again, GIFTING.
Let me elaborate some do's and don'ts of gifting...
Exception to the holiday gift rule: If you have a client of whom your net profit is say, over... $10K/year...at this point, it is pretty important you should stay top of mind at the holidays with them IN ADDITION to an unexpected time of the year.
Let me elaborate a little further on why not to gift during the expected winter holidays. The purpose of gifting is to release the maximum amount of dopamine with your client to build a deeper relationship with them, right? When gifts are sent at expected times of the year, when other gifts are coming in their door, the experience won't be heightened to the point of the dopamine being released to be a direct reflection of YOU. Worst of all, your gift is piled in their office with many other gifts and may end up in the hands of someone who isn't a decision maker at that company.
Lets take "Surprise & Delight" to another level when gifting during the unexpected time. You've just created a memorable, emotional experience for your client. Yet, the enclosure card appears to be mass produced or typed on a packing list. YIKES! There went the dopamine. The purpose of the gift is to make them feel SPECIAL. There is NOTHING special about the insincerity of something that is mass produced. PLEASE. PLEASE. PLEASE. If not by you, by the gifting company, include a PERSONAL, HANDWRITTEN card!
Okay, so the gift is sent. Dopamine released. They now look at you and your company in a whole other light. The curtains of clutter and competition have parted. THEY'RE. NOW. YOURS. They're now advocating for you by one of the most priceless and least expensive forms of marketing... WORD OF MOUTH. Once gifting becomes a part of your on-boarding and retention process, you'll start to notice that because of a shift in retention vs the cost of new lead generation, you'll be able to rearrange your marketing budget to better facilitate your company's profits by 25-100% on average. Your CFO just became your bestie...ha!
Here are a few facts and statistics on retention...
In the banking industry alone; one of the most competitive industries, 36% of their customers leave before their one year anniversary as a customer due to lack of exceptional customer experience. But, 16% of that 36% left before their 100 day anniversary. What if 5% of them could have been retained?
By now, you're probably understanding a little more why it's so important to add another layer to your retention tool box. The most impactful tool is gifting because of the effect of dopamine and relationship building.
Here are some quick ideas of when to "Surprise & Delight" through gifting...
We should probably talk gifting budget because that's the question we get most from our clients. "How much should I spend on a gift?" Well, we can't really answer that for you because on you and your company know your approximate net profit or the value of retaining that client for long term success. However, we did ask a few of our corporate gifting clients on your behalf prior to writing this article. Some shared that based on their industries regulations, they set a budget. Others shared that they budgeted anywhere from 2-10% of their NET PROFIT per sale on their gifting strategy. Many spread the gifts out through the year if they're a service or product based company who has a large invoice total per client (over $10K) and others utilize gifting with a small-medium budget in an expected time of year just once a year. Overall, you have to decide what is best for your company. Gifting something of quality and meaning with a handwritten note is better than nothing at all as a starting point in your strategy. Like most things in life, quality over quantity when gifting.
Your gifting program should be seamless and simple for you and your company. Select a product or company of whom you can build a relationship with so they know your style, preferences and will work with what is best for YOUR company while putting your brand forward with the recipient.