June 2002

Customer Retention 101

BY DR. WAYNE THOMAS

If you�re in the convergence channel, you know that your lifeblood lies in securing new customers and keeping your current customer base happy. But in tough times, when prospects are scarce, are you doing the right things to retain your current customers? What are you doing to make sure that their experience with you meets, exceeds and anticipates their expectations? Do they regard you as just a supplier of technology, or a business partner?

Enterprises, both large and small, continue to spend on applications that will make them more profitable and productive. There�s no doubt about it. Despite the effects of the economic downturn and the plunge in company profits, the enterprise and consumer market for voice and data equipment and services experienced healthy, double-digit growth, rising 12.4 percent to total $296.8 billion in 2001, according to findings from the 2002 TIA Telecommunications Market Review and Forecast. What�s more, this segment is predicted to increase at a 12.6 percent compound annual growth rate to reach $477 billion by 2005.

What can you do to make sure you capture your share of this market?

Mine Your Existing Customer Base
Focus on keeping your current customers loyal and coming back to you. JoAnna Brandi, a top-ranked motivational speaker and president of JoAnna Brandi & Company, presented a March seminar via audioconference to TIA channel members and indicated an increase of just five percent in customer retention can boost your bottom line anywhere from 25 percent to 125 percent. In fact, Brandi believes that even a two percent increase in retention can be as effective as a ten percent cost-cutting effort.

�Most businesses lose between 10-30 percent of their customers every year. Some estimates are as high as 50, 60, and I�ve even heard 100 percent turnover in customers. That costs you money,� said Brandi. �In many businesses, it takes 18-24 months for a new customer to reach the break-even point � that�s the break-even point of acquiring them. You see how the money is just pouring out. It�s as if you begin to leak money, if you lose customers.�

Assess Your Business Metrics To Help Retain Your Customers
You must create value for your customers in order to keep them from straying. You must define a process that is focused on building and sustaining your current relationships. The TIA channels benchmarking report, Profitable Convergence, Roots, Paths, and Predictions for Evolving Channels, indicates that selling a new product or service to a new customer can cost up to 12 times the cost of selling an existing product or service to an existing customer. Since existing clients are proven buyers, you must learn how to get them to buy again and again.
To understand the needs of your customers you must understand the current business conditions that are driving the need for your products and services, and the cost implications of moving outside your traditional space, as well as outside your traditional customer base.

TIA�s channel benchmarking report offers the following information to help you frame your account strategy:

P = Product, S = Service

With a benchmark like this, you can more easily determine to which quadrant you should devote more or less of your resources. Which is the right path for your company at this point in the market?

�It always costs less money to sell to an existing customer base,� according to Mark McKersie, president of First Telecommunications Corp. (www.first-tel.com), a Grand Rapids, Michigan�based communications solutions provider. �Once you�ve proven to your customer that you stand behind your work, and care about their needs, they are willing to pay for that assurance.�

Back To Basics For Customer Service
To help the channel get �back to basics� to better serve their existing customers, JoAnna Brandi�s TIA TeleForum outlined techniques that channel players in the convergence market can implement in order to keep their customers loyal and coming back for more. The advice JoAnna shared with TIA channel members is age-old, but continues to be a very applicable strategic objective for all channel companies currently in the convergence market. I�ve distilled some of her most salient points here to share with the industry:

1) Define What You Want Your Customer Experience To Be
How do you want your customer to perceive you? In order to gain loyalty, you have to make the shift from a transaction-based approach to a relationship-building approach. Think about how you want the customer to feel after he hangs up the phone with a rep from your company.

�Where you really compete is in the service you offer your customers,� says Christopher Cubbage, vice president of sales and marketing for Velocite Systems (www.velocitesystems.com), a Glen Burnie, Maryland-based systems integrator. �We�ve adopted the exemplary customer service credo set by the Ritz Carlton in their �Gold Standards Credo Card,� whereby each employee takes complete ownership of the task at hand and the follow-through, and we fit that into our customer service model. And we take a very proactive approach with our customer, advising them to new technologies that can improve the way they do business. We want to show the customer that we understand their business needs, and that we�re looking out for them.�

2) Be Clear On the Value You Provide To Your Customer
Use this information to communicate with your customers frequently and intelligently. In other words, don�t sell your customer a product, sell them a solution that will enable them to be more efficient with their customers. Don�t sell them a voice system, sell them confidence that their communications needs will be met effectively by your team.

Mike Billings, manager of the corporate solutions division of Teleco, Inc. (www.teleco.com) a U.S.-based interconnect, emphasized the importance of being able to solve the customer�s problem.

�One of our customers has 700 stores nationwide. Their MIS Department was having a difficult time maintaining and managing all their telephony equipment, remote handsets, paging interfaces, etc. If one of the stores had a problem with their equipment, the MIS department would get a call, and they�d try to analyze the problem, contact a local vendor to come in and fix the problem, and then it became an accountability issue, as they�d have to spend time matching up the vendor invoice with the correct work order. They were burning a lot of staff time and a lot of money, and getting buried in paperwork. It really slowed their process down.�

�What they wanted was a total solutions provider for all of their communications needs, and they asked us to manage those services for them. We offered them a maintenance contract whereby the MIS department would still get the first call for frontline support. But if they can�t fix the problem, they send the order electronically to us, and our team takes care of finding a local vendor to do whatever work needs to be done. The vendor invoices us, and we prepare reports for the customer, and the workload of their MIS department has been made a lot lighter. We �fixed� their problem. But it doesn�t stop there. Building a customer relationship is a process, not a one-time event.�

3) Develop A Planned Sequence Of Events
Set a schedule and plan a sequence of events to illustrate to your customer how much their business means to you. Follow-up with your customer through mailings, phone calls, e-mails, �love� notes, and invitations to events. These are the types of things that happen after the transaction has taken place and will help turn your business transactions into lasting relationships.

�One of the things I encourage my team to do is read the local newspapers to see what our customers are doing,� McKersie says. If I see that ABC company is breaking ground on a new building, I clip out the article and hand it to my sales rep. That sales rep then follows up with a phone call, or an email to let that customer know that we are following their business, and we�re here to help them in any way that we can. Creating the perception that we care about their business helps ensure that they will be more inclined to work with us again.�

4) Implement Customer Service Programs With Your Sales Team
Ask yourself �How did I provide value to my customer this week?� After you fill out your own list, ask the people that you manage to answer that same question. After a few weeks, your team is going to search for ways to provide value to the customers, so they can effectively answer the question they know is coming at the end of the week.

Phil Burkett, president of Communications Resources, Inc (www.crionline.biz), a Chattanooga, TN-based communications solutions provider, has implemented a program at his company that his team internally calls �First Touch.�

�The program provides our customers with additional value by ensuring that the first person they reach will be able to help them in some way, whether it be coordinating information, or generating a service ticket. When they hang up the phone, that customer will feel as if they accomplished something with that first contact, � Burkett says. �In our industry, many customers don�t think that the front-end person answering the phone is going to be of very much help to them. This program is about changing that perception and our goal is to provide value to that customer at that �first touch.��

Consistency in seeking examples of how your sales people have provided value will improve everyone�s focus on the customer. Your focus on actions rather than words demonstrates to all your commitment to customer service. Keep the lists posted because all good ideas are simply combinations of others!

Old Standards No Longer Apply
Steve Sutton, president of Copper State Communications (www.copper-state.com), an Arizona-based communications solutions provider, believes that too many companies are interested in making a sale, but not in serving their customers� continuing needs. �We regard sales as only the first step in establishing a continuing, mutually beneficial relationship with our clients,� says Sutton. �With each system we sell, we offer a very thorough five year warranty. So for five years, from soup to nuts, we�re there for them for their full support and training needs.�

It�s clear that the old paradigm of �plan, design, install, leave� will not work for any channel company in today�s increasingly commoditized convergence solutions market. The fact is, many of your customers that are in business today, may not be in business tomorrow. And of those that remain, many will need to upgrade their infrastructure as IP and IP-enabled systems become mainstream business communications solutions. Manage your existing accounts by focusing on the ongoing activities that occur after the initial sale or transaction. Doing so can make a big difference in your company�s bottom line. Remember, without customers there�s no business, and if you don�t take care of your customers, your competitors will be thrilled to do it for you. In this business, you have to service your existing base to survive.

Dr. Wayne Thomas is president of Thomas and Company (www.thomasandcompany.com) in Sudbury, MA; and chairman of the TIA Network Services Distribution Division. He can be reached at [email protected]. TIA is a leading trade association serving the communications and information technology industry, with proven strengths in market development, trade shows, domestic and international advocacy, standards development, and enabling e-business. TIA represents the communications sector of the Electronic Industries Alliance (EIA). Visit them at www.tiaonline.org.

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