In reality, it's a little unfair to lay blame solely on sales for the reputation that they sometimes have without involving marketing. So part of a marketing strategy revolves around customer retention.
Increased profitability due to customer retention happens because once a relationship has been established with a customer, benefits can accrue, as follows:
- Acquisition cost occurs only at the beginning of a relationship -- longer relationships lower the amortized cost.
- Account maintenance costs decline as a percentage of total costs.
- Long-term customers tend not to switch to another supplier or solution. They also tend to be less price sensitive, thereby making stable unit sales volume and increases in dollar-sales volume.
- Long-term customers promote by word-of-mouth referrals, are more likely to purchase related products, and tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.
- Long-term customers are less expensive to service and require less education.
Many of these benefits accrue directly to the sales force and sales support staff, but all of this does require an investment in all aspects of the marketing-sales process and -- controversially -- in the customer themselves.
Not all companies will embrace taking a long-term view of sales, and some should not take the long view. Which companies won't benefit from customer lifetime value? Primarily "one-shot" businesses that do not want, or need, to build a long-term relationship. For example, people who bought pet rocks when that fad hit the market in 1975 did not buy much else promoted to them. The novelty was what they were buying. For most of us, however, if one works in anything from a retail clothing company to a high-tech company, one will always benefit from working to retain customers.
There's been a surge in the popularity of getting rid of your problematic customers. For one company, a problem customer may be the rude person on the phone, a delinquent payer, someone who whines about perceived imperfections, or most any reason that a person might make up to stop dealing with someone. Choosing to "fire a customer" needs to be done carefully and selectively. This is one thing that I disagree with from the experts who advocate this tactic. Terminating a customer relationship because a product is being discontinued or sold to another company is one of a handful of legitimate reasons to "fire a customer." Of course, there are always the people who you cannot satisfy regardless of what you do. Terminating this type of relationship is tricky -- they have friends and they will talk trash about you and your company.
Some years ago before the Internet had really become accessible to the general population, I saw a customer complaint about a product that I managed. The original email went to perhaps a half dozen people. But those people told their friends, who told their friends... In the end, over 1,000 people had been copied on the original complaint. The complaint was easy to deal with, and we did so quickly and successfully. Firing the original poster as a customer would have left a bad view of the company and its product. Answering the complaint turned most of the 1,000 people into supporters, so the moral of this story is "Find every opportunity to retain customers and turn detractors into raving fans."
How about you? Do you have any customer- and/or sales-related stories you would care to share?