Keep your customers - and grow

Sukh Rayat looks at the connection between customer churn and profits

Rayat: It costs less to retain existing customers than to acquire new ones

To grow, an organisation must stop shrinking. The cost of retaining customers is less than that of winning new ones, so it pays to add value and provide excellent customer service to an existing customer base rather than continuing to refill a leaking bucket, as dissatisfied customers ebb away.

Every company has finite resources, so must focus on areas that produce the most profitable growth.

We manage the business using the three strategic pillars of profitable growth, operational excellence and people development. And we believe they are inextricably linked. Working with motivated people leads to operational excellence that in itself creates profitable growth.

Loyal customers will drive positive growth and loyalty goes two ways. By treating each customer as unique, and working with them to build an achievable business plan, you can commit to delivering a level of value and customer service in return for an expected amount of business.

The aim is to convert as many business partners as possible into loyal customers; in that way we can increase our resources, resulting in additional revenue and a win for everyone. This opportunity cycle makes everyone stronger.

As a business becomes stronger financially, it can expand by targeting new markets and looking for future growth opportunities, in areas such as new technologies and value-added scalable services. It can invest in new businesses and make strategic acquisitions, all of which will ultimately benefit customers and trading partners. The economic cycle brings with it further profitable growth.

Likewise, as a company’s bank balance grows it becomes easier to raise cash at competitive rates: a fact all too apparent in the current economic situation where smaller companies are finding it more difficult to obtain credit at sensible rates.

As momentum grows with loyal customers, leading to profitable growth and a positive reputation in the market, the ripples spread further. You will appeal to more customers and suppliers, generating increased customer confidence.

Taking care of customers in the same way you would take care of a prospect will boost revenues and reduce the cost of sales.

However, one size does not fit all. Every business has something its customers value, but this might be different for each customer. One might value technical knowledge, while another might put more importance on financial stability and assistance.

Establishing what is important to your customers helps you know where to pay most attention.

Customer loyalty programmes can help here. However, ensuring a feedback mechanism through ongoing dialogue with your customers and regular customer satisfaction surveys will really pay dividends.

A company in the services sector largely depends on its customers’ success.

If customers continue to dispute every penny of the bill, maybe superior service is not important to them or certainly they do not value it, and you may wish to review your approach.

For many channel companies, adding value is paramount. Our intellectual property is in our people and it is those people who deliver service. So once again you can see the link between motivated, happy employees; satisfied, loyal customers; and profitable growth.

Sukh Rayat is senior vice president for EMEA sales at Avnet Technology Solutions