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Small Business Insights: A Look at the Importance of Customer Retention

Small Business Insights: A Look at the Importance of Customer Retention

As a small business owner or director, you understand how important it is to build a solid customer base. You have allocated a budget that is earmarked for capturing new customers in a concerted effort to stay competitive in your market. However, unless you spend an equal amount of resources retaining your current customer base, you will simply be replacing old with the new. When it comes to business growth, never underestimate the importance of customer retention on a number of levels. Let’s take a look at how this works in the banking industry on a local level.

Why Are You Losing Customers?

Have you ever done an in-depth assessment of why you are losing customers along the way? Perhaps you should ask them! One of the key ways to identify your business’ issues with customer retention is to provide an exit questionnaire or survey. This is especially helpful in the financial sector. Why are customers moving funds or investments to other banks or investment firms? Are they finding higher interest rates or better customer service? Perhaps there is a broader array of financial products elsewhere or maybe banking options are more convenient online or with 24-hour banking kiosks or even mobile banking apps. You’ll never know unless you ask them!

Growth Leads to Greater Investments

Consider, for just a moment, a local credit union serving a particular employee union or perhaps a county. Unless you reach beyond the finite number of employees or residents in your local area, there is no way to gather a larger customer base. It is vital to retain those with deposits in your financial institutions while reaching out to an ever-broader market. If you notice a pattern of customers moving their funds to another bank or financial institution, that exit survey can tell you why they are moving funds and how you can compete with those reasons. Remember, if you can offer them the very same financial products and services as they are seeking elsewhere, it is likely you can retain their business.

Building on a Foundation

One particularly helpful analogy would be that of a building contractor. Until the groundwork is complete and a foundation is laid, there is no way to build up the various floors on a high rise building. Your current customers are the foundation. Unfortunately, unless the foundation is solid, the entire structure will come tumbling down. That foundation, your current customer base, must be strong before you start adding layer upon layer of new customers. If you start losing customers in your loan department, for example, that floor will not bear the weight of the departments above it – and so it goes.

Yes, you know that in the banking industry, or any business for that matter, customer retention is vital to your survival but are you giving adequate attention to maintaining a solid foundation? Don’t try to guess why you are losing customers. Ask them! Given this information, you can correct any oversights on your part. You might find that by showing concern for ‘why’ they are leaving you just might be offering the impetus to retaining their business. It never hurts to ask.

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by Marissa Collins //

Opinions expressed by contributors are their own.