The 3-Step Customer Retention Formula
In No B.S. Guide to Maximum Referrals & Customer Retention, business coach and consultant Dan S. Kennedy and customer retention expert Shaun Buck present a systematic approach to help you keep, cultivate, and multiply customers so you replace income uncertainty with reliable income through retention and referrals. In this edited excerpt, Buck explains how his three-step customer retention formula works.
My co-author, Dan Kennedy, tells of being in the “waiting room” of a professional’s office on a fairly busy day and overhearing a conversation among several others waiting to be seen. The entire area was fresh from major remodeling, with new carpet, furniture, several big flat screen TVs playing different daytime shows, and a fancy beverage bar. One person said to the other, “I don’t care about any of this. I just wish he’d be on time and that my appointment time meant something.” He said it with a few swear words inserted. The person next to him said, “Second that. We wouldn’t need TVs to watch if we weren’t kept waiting around for a half hour or hour.” Soon, several more people joined into this shared frustration conversation. And what do you think the odds are of retaining them? What about getting referrals from them? As a business owner, it’s important to know what’s really important to your customers.
The complete formula for retaining customers is simple:
Shared Interest + Shared Space + Shared Concern = Customer Retention
This isn’t a new concept. We’ve all used this formula to make friends, find a spouse, etc. First, you need to find shared interests -- those areas in your life that overlap. For example, I have five kids and they’re all boys. Each year, we go to Disney World. In those two short sentences, I’ve connected with a large number of people, including:
- People who have kids
- People who love Disney
- People who have large families
- People who have all boys
- People who have large families and who had a string of either boys or girls before finally having a baby of the opposite gender
I never communicate with my clients just about my products, services, and business. Doing that positions my clients as just customers of and for my business. I want a relationship, so I share my life, my interests, my experiences, my ideas, who I am and what I’m about, so they can find shared interests with me.
This is something a lot of business owners find difficult to understand or do. When I’m working with a customer who sells business to business, they often feel that opening up on a personal level is crossing some invisible boundary. I find this funny because at the end of the day, a person, not the business, is the one who decides to buy your product or service. You’ve heard the saying, It’s not what you know, it’s who you know. Regardless of whether you’re selling B2B or B2C, people would rather do business with someone they know.
Here’s an example of how a shared interest has worked well in my business: A very successful business owner running a multimillion-dollar company got his hands on my newsletter. Inside each edition, I have a section called “Have you heard the good news?” It shares a handful of Bible verses each month. My prospect also happened to be a Christian, and when we were both at a direct response marketers’ training event, he stopped me in the hall and started a conversation with me about the Bible verses in my business-to-business newsletter and my reasons for deciding to add that section. That single point of connection has turned into a multiyear business relationship and a close personal friendship as well. Is it possible we would have worked together anyway? Sure, but it’s also possible we wouldn’t have.
Sharing an interest is important, but so is sharing a space, and it’s simpler to accomplish than you might think. You want to be present in the lives of your customers. The supermarket gets you to buy insulated canvas tote bags with their logo on it to bring with you shopping. It hangs in your pantry or by your door, rather forcefully reminding you to shop at that store and interfering with an impulse to go somewhere else. That’s a retention strategy.
Another way to do this is to give your customers a plaque they can hang on their wall or your book to put on their bookshelf. At my company, our goal is to be in and around each prospect and customer in as many different ways as possible. Here’s a short list of some of the ways we maintain a presence in our clients’ homes, offices, and vehicles:
- Monthly print newsletter x 12 per year
- Weekly email newsletter x 52 per year
- Plaques to hang on the wall x 1 lifetime
- Framed first edition newsletter x 1 lifetime
- Educational audio CDs with our branding x 12 per year
- Gifts x 4 per year
- Logoed water bottles x 1 lifetime
- Marketing examples that are worth saving, many of which include our branding x 6 per year
- Birthday and Christmas cards x 2 per year
- Special reports x 6 per year
- Reference materials with our logo and branding x 2 lifetime
- Thank-you cards x 5 per year
Sharing space in someone’s physical world is not a new idea. Walk around your house tonight and look at all the logos and branding that’s all around you. My co-author, Dan Kennedy, literally has a bookcase in my house. When he first started making an appearance in my life, he had one spot on my bookshelf. As time went on and he continued to write books, he soon had a whole shelf. Then, as I started receiving newsletters and CDs from him, his space grew. Now I have 20-plus binders filled with his years of newsletters and dozens of sets of course materials. At my office, I have even more of his books in our office library for my team to check out. I even have a Dan Kennedy bobblehead! And finally, in all three of my cars, you can find his CDs. Do you think I listen when he talks? Long before I personally knew Dan, I had a relationship with him, and part of that relationship was developed via his ever-growing presence in my space.
Shared concern is the final piece to this formula. Relationships don’t thrive when they’re one-sided -- you have to genuinely want to help every customer and prospect. You have to work to help them come up with the desired outcome that they not only want but find to be in their best interest. Too many business owners put their needs ahead of the needs of customers and prospects, and although you may do well for a time under those circumstances, your customer retention rates will suffer, your referrals will be nonexistent, and ultimately, your business will plateau or, worse, rapidly decline.
Customers want to believe that your concern for them goes beyond getting into their wallets! The more ways you find to demonstrate that, the stronger your customer relationships are, the better and longer the retention, and the more frequent the referrals.