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Customer Retention: When Short-term Gain Equals Long-term Loss

Published on Aug 15, 2011


Read 'Customer Retention: When Short-term Gain Equals Long-term Loss' at 'Time to Start Up,' the small business blog by BizFilings.

Without customers, a business can not survive.

And although customer retention is a key to long-term success, the simple concept of outstanding customer service seems to get lost quite often by small and large businesses, alike.

Customer service, which I refer to as customer care, sometimes means making less money — or even losing money in the short term. But if we don’t take a long view, the results could be a disastrous for our customer retention rates.

For example, I was recently in a supermarket that I frequent on a regular basis. The grocery department was kind enough to hold five cases of Honest Tea that I ordered when the tea was on sale for a dollar a bottle. Excellent customer service, right? Especially when the regular price is around $1.50 per bottle.

When I went to pay, I was told that they were not extending the sale price to me because the sale was over. I explained that I had been told by one of their employees that as long as I ordered the tea while it was on sale, I could pick it up anytime and still pay the sale price. I also explained that I had been doing this for over three years. What changed?

I was given a curt answer: this was simply not their policy, and they were sorry they couldn’t help me.

WOW. They weren't thinking about customer service or customer retention.

No effort was made to make me happy, or to provide the discount one last time (which would have created a buffer between my current expectation and my future expectation).

My average spending was about $200 per week in this supermarket. Now the thought of going there turns my stomach.

Bottom line? The store made an extra $30 when they sold me the tea. If I never shop there again, they’ll lose $10,400 per year in sales. All because they didn't understand the importance of customer service.

Their short-term thinking has led to long-term loss. And if they do this to enough customers, they will have no business at all. Many successful businesses have a strategic business plan that's geared toward increasing their bottom line. The good ones also focus on customer retention.

We need to treat our customers like gold. Not only is it the right thing to do, it’s also the way of integrity. The result is a healthier, more profitable business.

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