Retaining a New Customer is just as Important as Gaining a New One
Management teams of emerging companies usually make the frequent mistake of spending too much time focusing on customer acquisition and too little time on retention. Scaling a business and getting it off the ground by building customer traction should symbolize one of the primary focuses of an early stage company. However, if you do a very poor job of engaging your customer, building loyalty and generating repeat business, you run the risk of being on a constant treadmill as it relates to building your revenue, for you will by no means benefit from positive word of mouth (and ultimately chance failure).
Two weeks ago I experienced firsthand a perfect illustration of a young company making this serious mistake. I got an email containing a pretty compelling offer to eat at a new local restaurant for a heavily discounted cost from one of the usual group buying sites. After considering the economics of this new deal, the restaurant was most likely barely breaking even or possibly experiencing a slight loss from the deal (it was apparent with their marketing strategy they were making a significant investment in customer acquisition). Intrigued by the offer (and also curious to see if this new place had anything to fulfill my foodie lifestyle) I made the purchase and was prepared to chow down. Kudos to this new restaurant…their go to market strategy proved successful in getting a brand new customer and possible repeat “diner” to help build their following…
Friday night comes, my belly is ready and let’s just say this new restaurant absolutely fumbled the ball. Not to go into elaborate detail, but I witnessed a staff who was not aware of the special deal except management …so customer service clearly failed. I waited thirty minutes past my scheduled reservation; I experienced very weak wait service and had an overall “unpleasurable” evening (though the food was half decent).
The restaurant was great at spending much effort and resources on acquiring new customers who ultimately would turn out to be a negative word of mouth source based solely on a shortage of focus on retention (not a very good move).
What is the lesson behind all of this? It’s not all about customer acquisition. Focus on your customers as though they were your very best customers and do everything in your power to keep them and assure their happiness. The net effect will not only be repeat business, but also positive word of mouth and an increase in your net promoter score. If an individual takes the leap of giving you their business, don’t fumble the ball!
Kobie Fuller is a Senior Associate at OpenView responsible for the identification and qualification of investment opportunities in addition to helping manage the outbound program.
