How to Improve Customer Retention: Build Wells not Fences

Retailers spend an enormous amount of time and money battling to win new customers. But what if they already have you as a customer? Are they as focused on keeping you as they were on winning you over? Not likely.

If you already decided you like a product enough to spend your money on it, you probably dont need to see and hear the same generic advertising and marketing that convinced you to buy it in the first place. Youve evolved and deepened your relationship with the product and brand, so why doesnt the retailer make an effort to deepen its relationship with you?

Scott McKain, a recognized author and advisor on retail strategy, says retailers are fanatics about customer acquisition but lack passion and precision when it comes to customer retention.

We focus so much on acquisition, but we dont focus as intensely upon retention, and its absolutely critical because net new business means than we not only keep the customers we have but we grow on top of that, said McKain.

From Acquisition to Retention

Retailers that do not focus on customer retention and building long-term relationships work harder to maintain sales. Thats because they are always laboring to keep the number of net new customers high. Instead they could be fostering repeat sales with customers they have already won.

The chances we can get existing customers to do more business with us is much more likely than what it takes to go out and get somebody new, said McKain. For some retailers, switching focus from customer acquisition to retention is a tough but necessary change in mindset. To explain the change, McKain tells a great story he heard from a business executive who grew up on a cattle ranch in Australia.

The executive said he grew up on a huge ranch. That was great for the cattle, but the ranchers had to figure out how to keep them from wandering off their land. One solution, he said, was to build fences around their property. But that amount of fence was very costly to build and maintain, and the cattle would sometimes break through it anyway. So instead of building fences they decided to dig wells. The cool fresh water was such a delight for the cattle they never wanted to stray off the ranch. The cows were happy to stay home and the ranchers accomplished their goal faster, easier, and for less money.

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How to Improve Customer Retention: Build Wells not Fences