Ask SCORE: What can we do to gain more new customers?

by Gray Poehler, a volunteer with the Richmond, VA Chapter of SCORE

QUESTION: Ever since the beginning of the recession our growth has been stunted. Sales are now improving, but our client count is about the same. What can we do to gain more new customers?

ANSWER: Client growth is a function of attracting new customers and retaining old ones. It does no good to bring in a new account today if you lose an old customer tomorrow. 

Too often, owners and managers place too much emphasis on new business and fail to appreciate the value of long-term customer relationships.

I owned and operated an independent insurance agency for many years. We did an analysis of our customer retention rate and found that we were losing about 1 out of 10 customers each year. The reasons included going out of business, sale of the business to another person and losing business to a competitor. While we could not control the first two, we decided to take a hard look at the third.

Customers change providers for many reasons. Surprisingly, studies show that price is a distant third to product quality and customer service. As we were a service-oriented business, we decided to focus on customer service.

As an example, we had many contractor clients who required that certificates of insurance be delivered to a third party with short notice. We made a same-day commitment to these clients, even if they called at closing time. We also returned all phone calls the same day and never made a promise we could not keep.

Most of the customer contact was handled by our customer service team. Once the sale was made, it was the team’s job to ensure the ongoing care of the client.

As an incentive to our customer service staff, we developed a bonus plan to reward those who went the extra mile. Essentially, if they could, as a result of excellent customer service, reduce the attrition rate from 10 to 5 percent, they received a share of whatever commission dollars were saved.

To our great pleasure, we increased our customer retention rate from 89 to 94 percent.

Before this exercise, we were starting each year 11 percent in the hole. We had to make up this loss with new business before we could focus on any growth forecasts.

So do yourself a favor, and make the customer experience so user-friendly that clients will not be tempted to leave, and, just maybe, they will be the source of referred leads that will solve your new customer question.

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