Ways to Build Customer Retention

Newly acquired buyers are often unprofitable. The profits come from repeat business of loyal customers. Such customers usually:

• Buy more per year
• Buy higher-priced options
• Buy more often
• Are less price sensitive
• Are less costly to serve
• Are more loyal
• Have a higher lifetime value

So how can you attract and retain long term loyal customers? Using a customer marketing database, a number have tried and true methods really work and pay for themselves many times over.

The first step is to recruit the right kind of customers to begin with. Customers acquired by low-ball offers are seldom loyal. To attract the right kind of customer, sell the value of your service. Make them think about what they are getting rather than what they are paying. To keep loyal customers, once acquired, you must communicate with them often. Travelers created a one-to-one customer contact system consisting of:

• A letter 60 days before annual renewal
• Annual review
• Thank-you card in first quarter
• Cross-sell postcard in second quarter
• Newsletter in third quarter

The result of agents using this system was to raise the automobile customer retention rate from 85.1% to 90.5%, an increase worth millions of dollars to Travelers.