Why Most Companies Are Terrible At Creating Lifetime Customers

Evergage Blog

Ideas and Strategies for Real-Time Personalization
Why Most Companies Are Terrible At Creating Lifetime Customers

June 15, 2014 by

Businesses today are hyper-focused on growth in the financial numbers and customer base- Investors, owners and managers are all vying for an increase in new customers. If you’re wondering why, the reality is that a company’s financial health and valuation often depend on the growth metrics and momentum– they impact everything from the top down. More sales lead to increased revenue which allows for more hiring and development which leads to more sales and so forth.

To aid in the aspirational growth, marketers and salespeople are often tasked with upselling current customers and increasing the customer base. At the same time, another metric being monitored is the cost per acquisition, where generally speaking lower is better. These core goals fit neatly into the paradigm of earning more and spending less. Though revenue and costs are expected to head in different directions, they are often managed under the same leadership which can lead to confusion.

The philosophy of doing more with less to drive customer growth neglects the very driver of customer growth- the current customers’ experience.

The customer experience or customer satisfaction has been shown to be related to sales, cash-flow, long-term valuation and return on investment.  While the supporting data is available, to learn from this idea, let’s forget about company specific, industry specific and even country specific data. The most important element is to see the relationship from the current customers point of view and examine their decision-making process.

Ask yourself the following questions and think about your experiences as a customer:

Why do customers stay with an organization or why do they leave?

And what does it take to create a lifetime customer?

When pondering these questions, many will start to focus on elements such as competition and value. Maybe the customers are happy because your product is the best available, a good price for its value or because it’s the only option. Similarly, perhaps the customers are unhappy because a competitor has different features, your price is going up or your “secret sauce” is no longer secret. There’s absolutely no denying the fact that all of these drivers are important.

Yet surprisingly, none of them are the main reason customers decide move on.

According to Forum Corporation Research, “Almost 70% of the identifiable reasons why customers left typical companies had nothing to do with the product. The prevailing reason for switching was poor quality of service.” 

When you consider that 80% of your future profits will come from current customers, it’s paramount that they be satisfied and stay with you. By combining the two data points, we can conclude that 56% of your future profits depend primarily on quality of service. Not price, promotion or competition. Granted, it’s not accurate to combine data point in that way, but nevertheless the point stands that customer service is a primary driver of revenue growth (these generalizations don’t apply to all industries).

Tying that idea back to the thesis, why is it that most companies are terrible at creating lifetime customers?

Well if you recall at the beginning of this article, I wrote about the metrics for a company’s financial health.  Customer service wasn’t mentioned until the 3rd paragraph- not because it’s unimportant, but because it’s usually not at the forefront with marketing and sales. It’s easy for businesses to look downstream and wonder where future revenue will come from and plan on how to earn it.

Perhaps ironically though, the source of tomorrow’s revenue is likely the same it was last week- your current customers.

Finding ways to enhance their lives and experiences of your customers will drive revenue.

Every time you contact them, either socially, on the phone, in person or through email, you should be trying to make their lives better. A customer-centric point of view will enhance their lives and you’ll have a stronger company as a result. Customers will share inputs, tell their friends and repurchase without hesitation.

The catch is treading carefully when you want something from your customers.

Three areas of concern are upselling, marketing and referrals.

Upselling is great if you’re offering a valued enhancement. Marketing is great if you’re offering education for customers and their peers.  Referrals are great too if there is something in it for them. If those three tactics are just a means to an end, they simply won’t work.  Consider that when you’re planning out your sales and marketing strategies moving forward. Your customers will thank you and your business will blossom.

 If you have another reason why companies are terrible at creating lifetime customers, share  your ideas in the comments section below.

Share This