Unlocking the Secret to Doubling Your Profits with One Simple Improvement
Starting and growing a recurring revenue business in the automotive industry can be a daunting task, especially when there are countless metrics to consider. As a leader, it's not uncommon to find yourself sifting through heaps of data in search of the metrics that truly matter. However, in the midst of this frenzy, one critical metric often gets buried and overlooked – customer retention.
While most senior leaders are aware of customer retention's impact on their business, they may not fully understand or appreciate its significance. Did you know that according to a study done by Bain & Company a 5% improvement in customer retention increases profits by 25-95%? Furthermore, improving customer retention can be challenging and complex, which leads some leaders to resort to a “strategy” of trying to outsell their churn. Unfortunately, this approach can lead to a vicious cycle of higher churn rates and increased difficulty in selling.
So, what can you do to improve customer retention? Here are three tips that can help you get started on the path to success without breaking the bank.
Tip #1: Separate Customer Retention From Other Metrics
When it comes to tracking customer retention, it's important to report on these numbers independently from other metrics in your business. This means avoiding the common practice of combining customer retention figures with sales numbers, as doing so can mask potential retention issues. Even if your sales figures are strong, it's possible to have a customer retention problem that's being overlooked. By reporting on retention independently, you can better assess how well you're retaining customers and identify any areas for improvement.
Tip #2: Have Clear, Differentiated Ownership of Customer Retention at the Top of your Organization
Our second tip for improving customer retention is to have a dedicated owner of retention on your senior leadership team. In many cases, customer retention gets lumped together with sales, leaving the sales leader responsible for both acquiring new customers and retaining existing ones. However, we've found that having a separate senior leader in charge of customer retention can spark important debates in the boardroom. When discussing where to allocate investment dollars, it's essential to determine whether they should go towards developing new products for new sales or towards ensuring your current offerings meet the demands of your existing clients. By separating the responsibilities of new sales and customer retention, you can create more clarity and transparency in the boardroom. These debates can lead to better decision-making and ultimately help improve customer retention rates. So, consider adding a dedicated owner of customer retention to your senior leadership team to facilitate these critical discussions.
Tip #3: Recognize Your Customer Retention Heroes
Pop quiz! Who is your best salesperson? Most likely, you can easily name that individual. Now, who in your organization has been responsible for driving the most customer retention? That answer may not be so readily apparent.
This brings us to our third tip for improving customer retention: build a culture that recognizes and celebrates the everyday heroes who proactively solve problems for customers. It's easy to acknowledge the big wins, like a brand-new sale, but we often overlook the individuals who work diligently behind the scenes to prevent problems from escalating.
To create a culture that values customer retention, we encourage you to find ways to regularly recognize and inspire these unsung heroes. This recognition should align with your company's culture and values and may take many forms, such as a callout by senior leaders in your monthly all-hands and/or a peer-to-peer recognition program. By celebrating these individuals and their contributions, you can foster a culture that prioritizes customer retention and ultimately drive long-term success for ye action and contact us today to learn more about how Auto Market Insights can help you prioritize customer retention and drive long-term success for your business.