New report finds Canadian retailers risk millions this fall by not focusing on customers

Customer retention expert warns "know thy products, know thy customers

Originally published at:
http://www.newswire.ca/en/releases/archive/September2004/01/c5582.html

TORONTO, Sept. 1 /CNW/ - A Toronto-based customer retention expert today warns Canadian businesses that a full 14 per cent of revenue is tied directly to the customer experience and tens of millions of dollars hang in the balance if merchants do not take steps to improve customer service.

The findings were issued in a report from The Verde Group, a Canadian company that helps organizations measure the cost of customer dissatisfaction. The report data is the result of 26 studies conducted by Verde Group over the past five years in which 25,000 individual customer responses were analyzed.(*)

As Canadians head into one of the busiest shopping seasons of the year, Paula Courtney, President, The Verde Group, says merchants across the country need to step-up their customer retention efforts in order to retain existing customers and generate loyalty prior to the possible arrival of US retail giant Target.

If Target's takeover of Hudson's Bay Co. goes ahead, Perry Caicco, retailing analyst at CIBC World Markets, predicts that Target may drastically impact other merchants for months, and possibly reshape the entire Canadian retailing landscape.

"Too many organizations - both big and small - do not understand the direct relationship between customer retention and revenue," says Ms. Courtney. "As Canadians hit the shops this fall, retailers of every size should do whatever they can to keep their customers happy and coming back for more."

According to The Verde Group, approximately 60 per cent of customers have experienced at least one problem with a company's products or services in the past six to 12 months. And, when customers experience a problem, 27 per cent fewer of them will repurchase from that company or recommend their products or services to others.

The customer retention experts at The Verde Group have identified the top five ways Canadian merchants can hang onto their customers and limit revenue at risk.

Focus on retention - Today, businesses are at risk of losing a full 14 per cent of customers due to the problems they experience and the way those problems are resolved by the company and its employees. According to The Verde Group, the cost of acquiring customers can be up to five times the cost of retaining them and in some industries, a company only starts making money on a customer after as many as 12 to 18 months.

Stay away from the price game - If a company is not the low cost provider, it should not try to be for two months of the year. It's a game most cannot win and it will only erode the perceived value customers place on a company's products and services. Instead, market to the company's strengths and focus on high value items. Demonstrate value to current customers and think long-term revenue instead of short term profits.

Establish a customer focused return policy - Without a doubt, returns are expensive to manage and control. But worse yet is the cost of customer dissatisfaction, because once a company loses a customer, they rarely get them back. Additionally, each dissatisfied customer will tell 3.8 other people about their experience. That means if a company has one million customers and on average 60 per cent of them experience a problem, 2.3 million people will hear negative comments about that company. According to The Verde Group, absolutely nothing is more damaging than negative word-of-mouth.

"The return process can be friend or foe in the loyalty game," says Ms. Courtney. "Done properly with the customer in mind, you will entrench loyalty, build your brand and grow your business. Neglect the return process and you will alienate your customers, generate negative word-of-mouth and put significant revenue at risk."

Invest in frontline staff and make sure they know your products - One of the most significant risks to loyalty is when customers receive different information from different staff, whether in store, online or over the phone. This lack of consistency erodes trust in the company and its management. In June of this year, the Verde Group surveyed 17,000 customers at a leading American financial services company and found that the number one way the company could improve its service to customers was to 'be more honest.'

"People prefer to buy from companies and brands they trust," says Ms. Courtney. "Employee knowledge of products and services is a trust builder and a key driver of customer loyalty."

Let customers touch, feel and try your products - Employing the "try before you buy" strategy à la Maytag helps to build trust and reassure customers about their purchase decision. This approach not only drives customers to store locations, it also keeps them on site for longer while they sample and possibly purchase additional products and services.

According to Ms. Courtney, most organizations do not do enough to retaintheir customers. "It doesn't take a huge amount of money to fix the problems that put customers and revenue at risk. In fact, it's the little things that matter most such as acknowledging and showing appreciation for a customer's business at every interaction."


The Verde Group is a Canadian company that specializes in helping organizations measure the cost of customer dissatisfaction, prioritize the issues based on ROI, and quickly fix them for improved retention and profitability. Based in Toronto, The Verde Group has consulted internationally to clients including Rogers Communications Inc., Toyota, Levi Strauss, Royal Bank of Canada and Eli Lilly. Visit www.verdegroup.ca for more information.



(*) The results are accurate to within +/- 5 per cent, 19 times out of 20.

For further information: please contact Ann Gallery, High View Communications, (416) 322-5897, [email protected]