You are here

Retaining Clients Makes Sense. Can You Do It?

By Erica Whyman

It’s that time of year again, year end. In PEO, this is an exciting and stressful time. Onboarding large new clients generates a ton of excitement, but at the same time, it weighs heavy with stress and pressure to retain them. For certain clients, it is common sense – the more customers you can keep the better for business.

The Small Business Administration and US Chamber of Commerce cited that the cost of acquiring new customers can be 5 to 7 times more expensive when compared to the cost of retaining current clients. Customer acquisition costs today are rising with increased competition, placing a stronger emphasis on retention.

Authors Emmet C. Murphy and Mark A. Murphy of the book, Leading on the Edge of Chaos, cited a 2% increase in customer retention has the same effect as decreasing costs by 10% and depending on the industry, reducing the customer defection rate by 5% can increase profitability by 25% to 125%

One would think then that in customer centric industries, companies would invest as many resources into the retention process as they did the sales process, but this is often not the case. Resources and marketing strategies are designed to bring in new business, but at the end of the day, organizations lack a real strategic approach to tying the sales and onboarding process to the long term relationship and retention of the client.

Retention strategies should be applied throughout the client relationship and not just when a client is suspected to be at risk of leaving. Retention should be more physical therapy than emergency care.

Watch the trends of terminated and existing clients and compare that data to sales trends.

Here are some implementable retention strategies:

Who Are You: Differentiate yourself in the market, know who you are and stand for something. If you want loyal customers, they need to know who you are. In an industry like PEO, where service menus often read the same, knowing who you are in the marketplace, and utilizing that to bring in the right business is an effective marketing strategy. Actually standing for that, will result in loyal customers, and loyal customers go out of their way to stay. Part of knowing who “you” are is setting customer expectations and then meeting them.

Set A Goal: A certain amount of client attrition is part of doing business. It is vital though that you know what is considered normal customer attrition and what is impacting your bottom line. Establish a viable target goal for client termination and track efforts against that goal on a monthly, quarterly, and yearly basis. This tracking is especially important in an industry such as PEO where certain events throughout the year such as annual enrollment, year-end will trigger increased terminations.

Proactive Customer Service: Stay in front of your client’s experience. What do they like, not like and what would they like you to start doing? As a PEO, there is a vast amount of data stored on our clients. Utilizing that data to continually show the value of the relationship will increase client loyalty. If clients have been on a hiring spree, and data shows a 10% increase in WSE over the last couple of months, reaching out to congratulate them on their growth and offer corresponding services to their current business need, will show you are proactive. Are they utilizing the discounted background check service or recruiting services? Knowing your customer and coordinating your value proposition to them, makes it personal.

Aligning Sales and Service (Operations): Sales and Service and/or Operations are usually not in alignment. Sure, the sales person may take the occasional HR or Payroll Rep out on a call with them to help close the deal by selling certain service components, but there is often a loss of information in the handoff from the sales process to the ongoing servicing of the client. What was the driver for the client to join the PEO relationship? Were they with a PEO prior? What caused them to leave? What do they want to see out of this relationship? This is information that not only should be handed off but should be available throughout the life of the client to all service teams. Knowing this information that the sales person has, will allow the service teams to meet the individualized needs of the client long term.

Loyalty Programs: Consider it, and no I am not talking about a punch card for every payroll you run and the fifth one is free, but consider those clients that have been loyal to you. So many times in PEO, the assumption is that a client that has stuck around for a long time is not going anywhere and all their needs are being met. Rewarding those customers for their continued loyalty will benefit you with a happy client, increased referrals, and increased revenue. Customer profitability, especially in PEO, tends to increase over the life of a retained client. With profit margins being squeezed competing for new business, it is often those existing clients with the higher profit margins have an economic driver for businesses to reward and keep those loyal customers.

Investing in a strategic approach to client retention is a wise investment that will pay you back in new business, increased revenue and happy employees. In an industry like PEO, your employees delivering the service are your secret sauce to success.

______________________________________________________________________________________________________________

About the Author

Erica Whyman is the Director of Human Capital Strategies at McHenry Consulting, Inc. and an authority on the delivery of high impact HR services as well as the development, and talent management of human capital within the professional employer industry (PEO).

Follow McHenry Consulting, Inc. on:

  

Theme by Danetsoft and Danang Probo Sayekti inspired by Maksimer