What is the Value of Customer Retention?

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Understand the value of customer retention

Many companies realize that customer retention is extremely important. They recognize that losing valued, loyal customers is bad for the company’s long term revenue potential and overall success. Even though this is understood on a basic level, few companies – especially those companies providing a service – seem to misunderstand what losing a single customer can mean to their business.

Example:  Sandra took her car to an auto maintenance facility for trouble with her oil gauge. Sandra knows very little about cars, so she decided it would be wise to have her car towed to the closest auto maintenance facility to be serviced. The mechanic on duty treated Sandra with absolute condescension.  He acted as if Sandra should know much more about cars and how to check her own oil. Upon completion of service, the mechanic charged Sandra for 2 hours of service even though Sandra had only waited an hour for her oil to be checked and changed.  It was obviously a bad experience for Sandra, and she had no intention of returning to that auto maintenance facility for future services, nor would she recommend their services to friends and family.

Six months later, Sandra was about to leave for work one morning when she noticed her left front tire was flat.  After having a horrible experience with the auto maintenance facility six months prior, Sandra decided to have her car towed to a new mechanic that was friendly and approachable. The mechanic on duty charged Sandra the fairest price he could, based on the work he completed. He even rotated Sandra’s tires for free.

A year later, Sandra was in an auto accident. Her car need more than $3,500 in repairs. What auto maintenance facility do you think Sandra went to? You guessed it – auto maintenance facility number two. Because of poor customer service and lack of value for their customers, the first auto maintenance facility lost out on thousands of dollars in revenue.

Why measure the value of customer service?

The above scenario is a perfect example as to why it is important to monitor both the long term value of a customer and the importance of communicating that value to employees. Gathering usable data about customers through regular administration of customer satisfaction surveys with survey software is a great way for companies to use that information to make important changes focused on customer value. Knowing exactly what customers want, need, and expect from your company, and conveying that information to employees is the key to retaining valued customers.

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