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Customer Retention: the True Measure of Success

By Nancy Drexler

Most people think of marketing as a sales tool and use their marketing dollars primarily to attract and recruit new customers. This is often a mistake. Acquiring new business is certainly necessary for the ultimate growth of a company, but marketing to your current client base is of equal, and often greater, importance than playing to an audience of unsigned business.

In the end, many businesses will actually grow more rapidly if they focus on retention instead of acquisition.

For economic reasons alone, marketing to your current customers serves as a more practical strategy. Companies spend far more money and energy finding new customers than they do trying to keep the ones they already have. Retention programs become relatively inexpensive when compared to the alternative cost of losing customers.

If you're an ISO/MLS, calculate the loss of one merchant from your portfolio, and you will understand the significance of retention. You've not only lost one month's residuals, but you've also lost one month's residuals over a lifetime.

Unless you successfully service the merchant, you've lost his potential referrals. You've also lost the expenses it will take to sign and train a new replacement merchant.

If you're an acquirer and you lose one ISO, calculate the loss of that ISO's merchants over a lifetime, his ISO referrals, and the cost of finding his replacement. You will find that it's quite expensive to neglect your customers.

Doting on Your Customers

Long-term benefits of a successfully launched customer retention program include not only your customers' increased value to your business, but also the prospects that these customers recommend. Customer retention programs are meant primarily to make your customers feel known and special, which gives them a sense of loyalty and commitment, a reason to stay.

Do you and your staff really know your customers? You should, and knowing their DBA names is not enough. The first step of a dedicated retention undertaking is getting to know your customers both inside and out. This includes learning about not only their business interests but also some things about them personally. Make sure that you share this knowledge with your staff so they can interact with clients accordingly.

In addition, if your best merchant is Ted's Toy Shop, you should not only know how much volume the store brings in a month, but you should also know Ted, where he comes from and his goals for the business. If Ted is ambitious, help him reach his goals. His success will only mean your success.

If your staff comes across a press release or information about new products and events in the toy industry, share it with Ted. Let him know of the processing options that are right for him.

Even if gift cards don't earn you maximum profit, they're a great service for a merchant like Ted, so take the extra time to explain the available packages to him and show him how Ted's Toy Shop stands to benefit.

Not All Customers Are Created Equal

The next step to knowing your customers is realizing their varying value to your company. Not all customers are created equal. They do not all patronize your business consistently; they do not all generate equal profits; and they do not all respond to the same incentives. Therefore, they need not all be treated equally.

In general, the 80/20 rule applies: 80% of your sales come from only 20% of your customer base. If you divide customers into tiers, 20% would get the bulk of your marketing dollars, and the remaining 80% would be divided into a middle segment of customers with potential to grow, along with a bottom segment that provides little to no profitability and might possibly even counteract your profitability.

It's up to you to analyze the personal goals for your business and evaluate how you would like to draw the dividing lines within your customer base. Figuring out how each customer affects your revenue is not an activity that requires deliberation or extensive reflection. Base your groupings on facts such as which clients pull in how much volume each month and at what cost. From this information, determine how you will treat and market to each customer level.

One option is to focus your marketing efforts primarily on your top tier, as they are your primary profit-builders. It's important to keep this group aware of your presence through carefully designed marketing efforts. Making these high-level clients feel as if they are company insiders and privileged to information that average clients are not is an effective approach to customer service with this group.

Express to your customers that they are important to you by introducing new ideas and products to them before you carry out a public launch by 1) conducting in-person visits to follow up on business matters and 2) addressing their complaints with promptness and care.

On a more personal level, you might choose to acknowledge birthdays and other celebrations or acknowledge unique contributions. However, remember to be cautious not to inundate them with too much information. Be aware of what's important to them, and restrict your marketing accordingly.

Your top-ranking customers most likely have the motivation and endurance to keep producing without your supervision; your challenge is to keep them producing with you.

Dealing with the middle segment of your customers is an even trickier endeavor. This segment is made up of those customers with the potential to grow into your big volume clients if encouraged and worked with.

It's difficult to determine how much energy to expend on this group, but it's definitely worth spending. Although they might not be as established in their businesses as your top-tier clients, you can guide them and help increase their profitability, which will increase their loyalty to you.

How to market to your least valuable customers is a decision you must make carefully. If you feel confident that members of this group have growth potential, then you might deem an investment of marketing energies worthwhile.

Programs involving major incentives might be an appropriate motivator for such customers to increase business. Educational programs are also useful for teaching business skills and industry know-how.

However, you must face facts. These customers add little to the overall success of your business, and spending time and money on this group might be a waste of resources. In this case, allowing a turnover might be your best plan of action. The bottom tier could be costing you more than they are worth.

Keeping Track and Monitoring Success

With the technology available to your business today, there's no excuse for not knowing your customers, both as individuals and as profit to your company. Their business information, interests and history with your company should be as accessible as your nearest computer.

All this information should be stored and updated in customer databases. Finding out which customers are the most profitable to you is as easy as creating a spreadsheet.

Technology makes keeping in touch a much simpler task today than it was years ago. Online surveys are a useful tool for monitoring customer satisfaction, if you have the resolve to follow through with solutions to potential problems.

Use your tracking system to keep records of anniversaries customers have with your company, their birthdays and other occasions, and to automatically generate a card, note or gift without requiring an excess of time spent.

If you are focused on success, the right marketing plan might serve as the kick your business needs to keep current customers and gain new ones at the same time.

Make your business one that provides results and value to your customers. Let them know you're different from the competition, and follow through with your promises. And remember that the success of your business is dictated not only by how many new customers you bring in, but also by how many of them you keep.

Nancy Drexler is the Marketing Director of Cynergy Data, a merchant acquirer that provides a wide array of electronic payment processing services while continually striving to develop new solutions that meet the needs of its agents and merchants. In addition to offering credit, debit, EBT and gift card processing, along with check conversion and guarantee programs, the company offers its ISOs the ability to borrow money against its residuals, to have Web sites designed and developed, to provide merchants with free terminals and to benefit from state-of-the-art marketing, technology and business support. Founded in 1995 by Marcelo Paladini and John Martillo, Cynergy Data strives to be a new kind of acquirer with a unique mission: to constantly explore, understand and develop the products that ISOs and merchants need to be successful and to back it up with honest, reliable and supportive service.

For more information on Cynergy Data contact Nancy Drexler, Marketing Director at

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