Keep an Eye on the Back Door

Understanding Why Customers Leave May Be More Important Than Understanding Why They Come

By Published on .

Arjun Sen
Arjun Sen
The cost of acquiring new customers can easily add up to five times that of retaining current customers. In the new world of marketing, where CMOs are more cost conscious than ever, a focus on customer retention is a necessarily logical pursuit.

This isn't just my opinion; we've done the research to back it up. Our company recently completed our fourth annual study of the restaurant industry, the Leaky Bucket 2010. The study analyzes the return intent of customers to a restaurant brand. Conducted in March, the study included 2,483 respondents and analyzed more than 146 brands. Our methodology analyzes a brand's leak score. The higher a leak score, the more customers that brand is losing; lower leak scores indicate a higher level of customer retention. For the fourth year in a row, the study results overwhelmingly indicate that brands that invest in guest experience retain more of their customer base and can thereby reduce marketing expenses and increase profitability.

The implications for marketers -- not just those in the restaurant industry but also for those in any guest experience-driven industry -- are significant. Consumers realize that there are better deals available, but better deals do not necessarily mean better experience. According to our research, a full one-third of customers are looking for a better quality offering at the same price they are accustomed to. As brands look forward, they need to proceed cautiously, as customers are still seeking better options. One of the most effective ways to retain customers will be to focus on guest-experience enhancement and making sure that every customer gets a compelling reason to come back.

Brands can turn customers into repeat customers by analyzing simple brand attributes that cause customer-base leaks and creating solutions that can be implemented on a day-to-day basis. For example, in a world where service will make or break customer loyalty, Chick-fil-A has instantaneously (and quite inexpensively) solved a source of customer-base leaks by simply using the phrase "my pleasure!" instead of "you are welcome" in interactions with each customer ... and they mean it! Of course, there are the exemplary "Nordstrom moments" of customer service that a brand may have once in a while and can use to get its employees feeling motivated and inspired. But instead of hoping and searching for that one "super-wow" moment, accept that the "simple-wow" moments are more effective for the majority of guest experiences.

To wit: On business in the D.C. area, I stayed at the Lorien Hotel & Spa in Alexandria, Va. The rooms were, as expected, clean and fresh, and the beds were comfortable. But what I found next completely surprised me. On the bedside table was a brochure called "Sweet Dreams Made Easy." Inside were three pages of stuff, mostly free, to make sure that I had a good night's sleep. They offered every kind of pillow imaginable, including snore-no-more pillows, body pillows, neck pillows, bed wedges, water pillows, magnetic pillows and contour pillows. To help guests unwind, they also offered lullaby library songs, ear buds, sleep masks, bedtime stories, a soothing sound machine, diffusers or a humidifier. If I longed for a midnight snack, they would bring me milk and cookies for a moderate charge, and if all else failed, for $20 I could purchase my very own teddy bear.

Wow! I thought for a second and felt wow (again). I had previously resigned myself to the fact that there could be no "really new" ideas in a hotel. Hotels to me have become transactional experience providers, but this was a case in which the hotel really knew the most important thing I needed and went all-out to make sure I got a good night's sleep. In other words, the hotel just gave me a compelling reason to come back.

A cautionary note: Too often, marketing teams create solutions that operations cannot keep up with. If the Lorien Hotel has only one night staffer available and marketing has introduced all these new products that guests can request for free, will the staffer be able to keep up? Will guests be irritated by the wait time instead of impressed by the availability of the options? Marketing and operations teams must form cohesive key performance indicators if they wish to be successful in repairing their leaks.

In today's world of budget cuts, the area marketers must focus on is how to enhance the everyday guest experience. Persuading the customer to return to the brand while he or she is still in the store can dramatically reduce costs associated with marketing once the customer has left.

Arjun Sen is the president-founder of ZenMango, a Denver-based marketing consulting firm working with restaurants, retail, charities and other guest experience-driven industries. He may be reached at [email protected].
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