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Customer ROI: Keep your customers (Part IV of VI)

Unleash the customer success cult effect. You’ll keep your bottom line healthy. And you’ll probably improve your top line as you deepen existing customer accounts while gaining valuable referrals.

5 min read

  So far in this series, I’ve explored customer renewal—not customer acquisition—as the key metric to long-term profitability. To keep your customers delighted, you need to shift your focus from customer satisfaction to customer success, and implement select active engagement strategies.

At the risk of stating the obvious, it’s important for you to compare your cost of acquiring a new customer to the value you gain by retaining a current customer. You’d be surprised how few companies focus on keeping their existing customers.  Costs vary by industry, but more times than not, you’ll find companies over-focus on their sales and marketing model to acquire new customers. They ignore the “easy money” of keeping existing customers happy and loyal.

What is your cost of customer acquisition?

SaaS companies can learn a lot from the mobile industry’s analysis on the impact of churn to their bottom line.  Due to competition, mobile carriers understand how much it costs to acquire a new customer versus losing one. For instance, the mobile phone industry pays a large price to acquire a new customer—$250, in fact.

And, it’s not uncommon for mobile operators to have to wait more than 12 months to break even on a customer. Compare this with Ariba, a cloud-based finance company, who spends $1.10 for each $1.00 of incremental profit. That translates to an average Lifetime Value of $4.15 per customer. (Source: Forrester)

What is your cost of keeping customers?

On the flip side, your cost of keeping customers is almost always zero. But be careful when contracts are up for renewal. When customers seem unlikely to renew their contracts, it’s easy to offer significant discounts to keep them. You’ve already spent the money to get their initial signature. So even if you have to significantly reduce your contract, you’re still ahead of the game, right? Wrong.

This is where a year-round customer success program pays off. If you’ve built the infrastructure to keep your customer happy and profitable throughout their entire contract term, they’ll be that much more likely to renew at current contract values or higher. A dollar may be better than zero dollars, but ten dollars are much better than one.

Taking it a Step Further—Tactical to Strategic

You also need to look at your whole organization. What are your costs on the front and back end? When you go above and beyond with a customer success team, you’ll keep more money in the family. You’ll keep your bottom line healthy. And you’ll probably improve your top line as you deepen existing customer accounts while gaining valuable referrals.

The Customer Success Cult Effect

Consider the Apple Genius Bar. Talk about going above and beyond customer support. You can walk into any Apple store and receive expert help for free for as long as you need. The Genius Bar changed the way retail companies view customer service. It’s the reason consumers are Apple lifers.

That’s how we do things here at Xactly – once we bring a customer in, we focus on the total customer experience. It’s a simple principle. Invest in keeping your customers and your investment will grow.