Jeff Standridge:
Hey guys, welcome to another episode of the Innovation Junkies Podcast. I’m Jeff Standridge.
Jeff Amerine:
And this is Jeff Amerine. How are you, Jeff? Good to see you.
Jeff Standridge:
Hey, I’m great. Good to see you too, man. We’ve been having a good several weeks here talking about sales, marketing, client acquisition. Today we’re gonna transition and talk a little bit about client retention and about the absolute importance because you know, retaining your existing clients is every bit as important as acquiring new clients. In fact, it’s been said that number one, it takes one-tenth of the effort to sell to an existing client or to create a repeat sale to an existing client. We touched on referrals the other day, which I think is important. And when you can retain a client and build such a strong relationship to where they will refer you to other clients, it takes 1/15th of the effort to sell to a client that has been referred to you by an existing client. So retention and meeting the needs of your existing clients is vitally, vitally important.
Jeff Amerine:
And businesses of all sizes that do a good job retaining clients are those that are in the long term the most successful and have the highest enterprise value. There’s no doubt about that.
Jeff Standridge:
That’s right. I mean, it does no good to go and acquire, you know, a 25% client growth every single year of new clients. If you’re losing 10% out the back door, you’re just spinning your wheels.
Jeff Amerine:
So true. Well, what can you do? What are some things you can do to think about as it relates to client retention?
Jeff Standridge:
Well, I think the first thing that you have to do is, you have to understand what is it that generates satisfaction and loyalty for your clients. We talked a little bit about understanding what they’re actually buying early on, and you have to not lose track of that. Sometimes it’s easy to get into a situation where you begin to take your clients for granted. You and I both teach as adjunct professors at two different universities, and when I was doing that full time, we had a running joke among the faculty that said, it’d be a great job if it worked for all those students. And while we kind of said that in jest, the reason that has become a bit of a joke is because faculties around the world sometimes lose track of their students, of who their actual clients are, so to speak. But it’s not just faculties in universities, it happens in businesses all over the place. And we get frustrated.
Jeff Amerine:
Can’t take them for granted.
Jeff Standridge:
Yeah, we take them for granted. We get frustrated. Maybe we have a day where two or three clients maybe really try us. They’re unrelenting. They’re being unreasonable. They may treat us badly and treat our folks badly. And we begin to project that onto all of our other clients. And we just, we lose track that our clients are the reason that we’re in business.
Jeff Amerine:
Absolutely. And if you can figure out how to keep them happy, keep them satisfied, and keep them on board, keep them working with you, it can lead to, definitely lead to long-term success. I mean, I’ll give you one example of what that can mean. There’s a, there’s a business I’m associated with that’s, uh, that’s in a particularly difficult vertical in the water quality, uh, management. In a recent board meeting, we were, we were talking about, well, what’s the lifetime value on a customer and what’s the churn and the churn was zero, which seems impossible to understand. But once they get in there, it’s a compliance-oriented business, and they deliver that value, it becomes something that those customers can’t do without. They have to have it. And they’re viewed as a mentor, as an educator, as a trusted advisor. They’re up on that spectrum that we’ve talked about before, and they just don’t lose accounts by virtue of that.
Jeff Standridge:
Yeah. You know, you talk about what can you do to really get in and understand, uh, client retention. And I think you just made me think of two things. One that you said, and I’m really glad you brought it up was this concept of, uh, lifetime value of a customer. If, if you don’t know what the light, the average lifetime value is of a customer, then, then you are missing out on an opportunity to improve your client retention strategies. Because if you know that the average lifetime value is $3,000, well then the next question ought to be, well, how can I make it five? And the way you make it five is by taking clients that might stay with you an average of 24 months and turning it to 36 months. And you wouldn’t really know that or you wouldn’t think about that if you weren’t actually measuring what I consider to be a real key performance indicator is average lifetime value of a customer. The second thing, go ahead if you want to say something about that.
Jeff Amerine:
No, no, keep going, keep going, Jeff. I’ll save my thought.
Jeff Standridge:
Well, the second thing is you use the word churn, you know, and I recommend when we’re helping clients build out a key performance indicator, KPI scorecards, and I’m pretty adamant about key performance indicators have to be things that you look at weekly, because we can get financial reports, we can get income statements on a monthly basis, but what are those things that you’re looking at in between the months in order to keep your business on track? And I like to suggest that they put down a client.
a lost client KPI. And then of course they set the target at zero and they say, well, I mean, we know we’re not gonna hit zero. No, you’re not. But if you’ve got a KPI and you’re gonna be looking at it every single week and find out where you lost a client, then you’re gonna be getting under and asking the question, why did we lose that client? So that forces you then to begin to understand what the red flags are. What are the things that we’re doing that’s causing our clients to stop coming to us?
And that could be a non-renewal of an insurance policy. It could be a moving of your deposits from one bank to the next and closing out your accounts. There are a number of ways that constitute a lost client. But figuring that out and measuring that, and then asking yourself, but even more importantly, those customers the question why, is a couple of greatest things that you can do to drive client retention.
Jeff Amerine:
Well, you know, on one side of that, it’s sort of the post-mortem, what could we have done differently? I think the other side before that happens is understanding what else can we do for you? You know, a lot of times once you’ve won the client and you’re delivering whatever the initial product or services, you need to constantly be figuring out what other unmet needs do you have that we have the capability to solve so that you can expand that land and expand strategy. That’s the way you…You keep long-term client benefit and retention by constantly trying to help them solve the issues that come up, the long tail in your business, so to speak.
Jeff Standridge:
Well, yeah, I completely agree. It’s this continuous provision of value and the personalizing of customer experiences. And I’ll give you an example. So back in the 70s, I believe it was, there was, it was the precursor to Southwest Airlines, was Scandinavian Airlines. And Jan Carlsen turned that airline around and he did so by by coining this phrase, moments of truth. He said, he inventoried every point of interaction with a customer that occurs from the time they start looking for tickets until they’ve disembarked and they’ve gathered their baggage and they’re departing the airport. And there were some thousand, I don’t remember the actual numbers, but an inordinate number of what he called moments of truth. The moments where we can actually demonstrate to the client that we have their best interest at heart. And he built a cultural initiative throughout their organization called Moments of Truth and then wrote a book on the topic. Well, a few years ago, I was traveling extensively internationally and both across the continent. And I had traveled to Philadelphia to meet with a client. And I was pretty loyal to American Airlines, but they had bothered me on a few situations with some of my international travel and…I had gotten to be not so loyal. I hadn’t, I hadn’t still hadn’t booked a bunch of flights on United or Delta or whatever. But I would, I would oftentimes take a flight that might not be advantageous to me timing wise just to kind of stay with American Airlines, continue to build those miles and what have you. But I really started to question, question that and I was coming back from Philadelphia and we were going to have to fly as you know, Little Rock’s not a hub. So we had to fly from Philadelphia to Dallas, then to come back east to Arkansas. And all of a sudden the captain comes on and he says, well, we’re gonna have to make a landing in Little Rock and get some fuel. Dallas is socked in and we’re gonna be in a holding pattern. So we’re gonna stop for a few minutes in Little Rock, get some fuel, and then we’ll be on to Dallas to get you there, hopefully within 30 minutes of our scheduled arrival. And so I called the flight attendant over and I said. Little Rock’s my destination anyway, can I just get off here? And he goes, yeah, that’s not going to happen. He said, we’re not even pulling up to a gate. We’re going to have a fuel truck come out to us. And so I was like, oh, well, he said, I’ll ask the captain, but I’ve never seen it happen in the 25 years I’ve been doing this. And I said, all right, well, if, if you could check with the captain, that’d be great. So as soon as we land, my phone buzzes, my flight out of Dallas is canceled and it’s the last flight of the evening. So I called the flight attendant over and, uh, and I said, Hey, I just got a notification that the last flight out of Dallas for Little Rock, which I’m on is canceled. And he said, well, I’m still waiting to hear back from the captain. I said, well, tell him this. I said, tell him that you’re going to have to fly me to Dallas, put me up in a hotel because you’ve canceled my flight. When you look out that window right there, you see that white GMC pickup right there. That’s mine sitting right there in the parking lot. He was like, Oh my God, I’ve never seen that before.
So a few minutes later. Somebody pecks me on the shoulder, he’s got an orange vest on, he said, grab your bag and follow me. And I turn around and they’ve rolled out the back, they didn’t open the front door of the plane, they rolled out the steps at the back of the plane, took me out the back of the plane, put my bags in a pickup truck, just a guy’s pickup, drove me over to a side door, he punched in a code, we opened the door and I was right in the baggage claim area. So I got home and my wife said, what are you doing home so early? And I said, well, first of all, my flight was delayed, it was rerouted. We had to land for fuel at another airport. My other flight was canceled and I got home four hours early.
And that experience, I’ve probably told that story a hundred times since then. And that experience was an opportunity for them to just recapture my loyalty. And they didn’t, they didn’t know I was sitting on the fence loyalty wise. They just did what was logical and right by me in that instance.
Jeff Amerine:
Yeah. It’s a great story. Too bad that doesn’t happen very often with the airlines, but that’s, that’s a fantastic story and it illustrates going, going the extra mile to retain a customer and doing the right thing. I mean, it’s just doing the right thing by, by people, which is, you know, it’s pretty simple when you get down to it.
Jeff Standridge:
Yeah, tell me about it. Tell me about it.
Jeff Standridge:
It is. You know, I’ve never believed in the adage that the customer’s always right because we live in a world today where customers can abuse organizations and they’re, you know, and they, if they get checked out wrong at a, at a cash register, then they said, well, that’s on them. You know, they gave me, you know, they didn’t, you know, that many of them won’t go back and correct it. They’re, they’re always looking for an opportunity. We’re on the take. We’re a society that’s on the take, I guess is the best way I can put it. And so I’ve never really believed in the client’s always right. But when, when the client isn’t wrong and the organization needs to do what’s right, that is what makes the difference in client retention and actually losing clients out the back door.
Jeff Amerine:
Absolutely. And it’s amazing when you see high performing organizations that do that. Well, it’s the, they, not only do they have low customer churn, they tend to have low churn on their team as well, because everybody gets used to going the extra mile and doing the extra things. And it’s, it’s got a gravitational pull to it. You keep customers, but you also keep the best people because you’re doing the right thing. And a lot of that gets back to starting with a great culture and all the other things we’ve talked about in previous episodes, you’re doing well.
Jeff Standridge:
Well, and here’s one question that I think you can ask your team and you can ask your clients as well, routinely, that if you take that collective feedback and you identify specific actions that you can take and policies and practices you can put in place as a result of the answers to that question, then you’ll be far better off from a client retention client loyalty. And that question is, how can we create wow with our clients? And that’s you know, what do we want our clients to say? We want them to say, wow. That’s what I said after the American Airlines experience. I was like, wow. And so if you constantly ask that self the question, ask yourself the question, ask your clients, your employees that question, and then you take action based upon the collated results, you can do the same thing with your employee population. How can we create wow with our employee population to drive employee retention as well? People like to be wowed. People like to think that they’re special. People like to be treated special.
And so if we can do that, it just ratchets up the amount of retention that we can build and loyalty we can build within the organization.
Jeff Amerine:
And believe it or not, I actually think having that approach is the path of least resistance and less friction because you avoid all those other problems that come from not doing a good job in retaining customers. It ends up being easier and quicker and more efficient because you’ve done the right thing to keep a customer with you.
Jeff Standridge:
Yeah. Yep.
Jeff Standridge:
That’s right. Well, we’re gonna land the plane on this one. We’ve got one more episode in this series on sales and marketing. And what we’re going to do in the next episode is we’re gonna, I was looking back through some of our notes and there are about four or five key skills, key selling skills that I wanna really, we may have just touched on them through one of the last four or five episodes, but I wanna make sure that we, that we cap this off with a punchy episode focused on the critical skills you have to master if you’re going to be a high performance salesperson. That work?
Jeff Amerine:
Yeah, no, it sounds great. Look forward to it.
Jeff Standridge:
This has been another episode of the Innovation Junkies podcast. Thank you for joining.
Jeff Amerine:
See you next time.