ClienTell® Consulting, LLC
 
Business Rationale
for Customer Satisfaction
If growing, why worry about customer loyalty?
        Reichheld demonstrated that customers are more profitable over time. In fact, he found that a 5% increase in retention could increase profits from 25 to 125%!* He showed how it takes time to offset the marketing costs to acquire new customers and how keeping them accelerates profit growth with: more and larger purchases, reduced operating costs, referrals, and willingness to pay a price premium (due to proven value). Quite simply, even a high growth rate with high customer turnover means your growth and profits could be exponentially greater by satisfying customers so much that they wont go anywhere else and wont tell others to follow when leaving you in the first place.
        Reichheld also observed if we
“…Imagine two companies, one with customer retention of 95%, the other with 90%. The ‘leak’ in the first is 5%, the second, 10%. If both acquire 10% more customers each year… over 14 years, the first will double in size, but the second will have no real growth at all.”**
        By ensuring loyalty, you invest every marketing dollar in growth, because you close the holes in the bucket and stop having to replace lost customers with new ones just to stay even!

*Harvard Business Review, Sept-Oct 1990.
**Frederick F. Reichheld, The Loyalty Effect, (Bain & Company, Harvard Business School Press, Boston 1996).

What's the payback from this process?
How do we link satisfaction to profits?
If growing, why worry about customer loyalty?
Why survey if we can't change our business?


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