“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” – Steve Jobs on customer retention!
For a long time, we have believed that acquiring new customers is the way to grow your business. So, all the efforts that are made, all the money earned is majorly focused on acquiring new customers. It’s exhausting, challenging and at the same time marginally yielding compared to the amount of time, effort and money put into it. Then why do you need to focus solely on customer acquisition as a source of growth for the business?
For our laundry industry, it is even more challenging to acquire new customers due to limitations of resources, skilled labor and reduced margins to increase profit share.
A smarter choice is to rather focus on Customer Retention. Customer Retention for dry cleaners simply refers to focusing on your existing customers to drive more revenue and better ROI from them and keep them loyal to your brand.
Initially, we were also not convinced until we took a look at these facts about the customer retention
10 facts about the customer retention >
1. 68% of customers leave you because they perceive you are indifferent to them.
2. An increase in customer retention by 5% increases profits by 25% to 95%.
3. Repeat customers spend 33% more than new customers.
4. 80% of your future profits will come from just 20% of your existing customers
5. Every cent spent on improving customer service yields 34% to 400% ROI.
6. 187% growth in online complaints from 2007 to 2010. (You can’t stop customers from being online, but you can prevent being talked about negatively online)
7. Satisfied customers on average tell 9 other people about the positive experience, but unsatisfied customers on average tell 22 other people about the negative experience. (No way do you want to send out a negative image to the customers that you have not even acquired, yet)
8. Loyal customers have a much greater lifetime value.
9. Customer retention for dry cleaners reduces churn, which means you need fewer new customers to increase your customer base and revenue.
10. 80% of companies believe they deliver superior customer service, but only 8% of their customers agree.
Let’s discuss customer retention in a little more in detail >
1) 68% of customers leave you because they perceive you are indifferent to them.
◦ Customer service needs to be consistent and continuous throughout the business processes. When customers get the vibe that they don’t really matter to you, it is highly probable that they might leave you for your competitors.
◦ Most of the time this doesn’t happen instantly, they gradually drop their number of orders and/or their amount of each order. These customers are identified as customers at risk. At this point, the game is not yet over. You can still win them over by wooing them with amazing customer service, eventually winning their loyalty.
2) An increase in customer retention by 5% increases profits by 25% to 95%.
◦ This stat is really moving. This information is derived from the fact that customer acquisition needs lots of capital input and hence it increases Customer Acquisition Cost(CAC). CAC cost is high because it includes the cost of all the customer journey stages that a customer goes through before turning into a paying customer. These stages are- awareness, interest, consideration and buying. Each stage may or may not result in customers going through the next stage, yet the money has to be spent.
◦ On the other hand, the journey of a customer post-acquisition is much shorter before turning into a loyal customer. The stages are- Retention and Advocacy. So it is basically a direct action game. Hence, whatever money and effort you put into retaining customers can get you instant results. This tremendously reduces the incurring costs.
3) Repeat customers spend 33% more than new customers.
Your current customers are well aware of the quality of your service and are much easier to convince to try more and new services. Whereas, with new customers, you need to establish credibility and reputation with a fair amount of time and effort. You need to earn their loyalty before convincing them to try services that are not of their direct interest.
4) 80% of your future profits will come from just 20% of your existing customers
This fact is a variation of the Pareto principle, also known as the 80/20 rule. As per the Pareto principle, 80% of the effects come from 20% of causes. This is equally applicable to our industry as well. In our case, your 80% revenue comes from 20% of your customers. And to continue to get this 80% of revenue, you need to ensure that this 20 % of your customers are retained at any cost.
5) Every cent spent on improving customer service yields 34% to 400% ROI
Let’s assume, that your minimum service costs 10. Now if you drive customer engagement through a discount offer- “10% off on all services above ₹500”. So ideally you are getting paid ₹450 for a service of 500. To avail of this offer, 5 customers spend ₹500 minimum who were earlier not spending more than ₹300. At a loss of ₹50 per order, you are earning ₹150 more from each customer. This means that you have still managed to earn an additional ₹100 per order. This is directly a yield of 200% on your investment of ₹50.
6) 187% growth in online complaints from 2007 to 2010.
Social media is as much a boon as much as it is a curse. You’ll get to know a lot every day and connect with people who can be your potential customers and put yourself out there to promote your brand and services. The side of the same coin is if you don’t live up to expectations, who you will be put on the spot for the whole world to see. Hence, you need to make sure that your service is not compromised with any customer at any time. You can’t stop customers from being online, but you can prevent being talked about negatively.
7) Satisfied customers on average tell 9 other people about the positive experience, but unsatisfied customers on average tell 22 other people about the negative experience.
This statement is more of a consequence of the previous point. An unhappy customer can cost you 2X of future customers than a happy customer can probably get you. No way do you want to send out a negative image to the customers that you have not even acquired, yet.
8) Loyal customers have a much greater lifetime value
Customer retention for dry cleaners can be a game-changer. A loyal customer is like a safe deposit. You know there is a safe which I can go back to in case of an emergency. But this safe doesn’t turn out in a day. It’s a constant investment of time and effort that has much larger returns.
9) Customer retention for dry cleaners reduces churn, which means you need fewer new customers to increase your customer base and revenue.
Phewww, we have finally made it to the cherry on top. Churn is the most dreaded term that we hate to hear. But it’s as unavoidable as day after night. The good news is, you can’t avoid it but you can definitely reduce it. Every customer that you retain is a reduced churn.
10) 80% of companies believe they deliver superior customer service, but only 8% of their customers agree.
Customers can really turn around the game. Now, to the best of your knowledge, you may be delivering a customer service that is great, but it may not be what your customers expect. Every relationship is a 2-way channel and for a healthy relationship, both sides get to have a say. Hence, to keep your customer service that is acknowledged great by both sides, you need to listen carefully and consistently to your customers by taking their feedback. Your customers are your best teachers, don’t lose touch with them.
Every business is unique in its own way and similarly their customers. Out of the above list, one point may appeal to you more than any other. But, as long as you have even one point that makes sense to you, it’s a strong enough reason to strategize your action plan. Sitting on the fence won’t change things for you but taking real actions. Customers are hard to acquire and easy to lose, but once lost it’s nearly impossible to win them back. Build a stickiness with your customers that is hard to leave.
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