Follow the 5% / 75% Rule
By Vivian Hairston Blade
For years, Jason has been an avid exerciser. Running and weight lifting
frequent his routine. With such an active exercise regimen, energizing music
is definitely required. A few years back, those clunky, skip-prone CD
walkmans were the newest craze, but just didn't cut it for exercise!
Finally, the iPod Shuffle came along. "Wow! All my music on this little
stick! This is great!", Jason thought. "But, hmmm... I'd like more
flexibility." He knew he would upgrade to the newest iPod.
Soon, it was time to replace his PC. "I was 'pulling my hair out' dealing
with the viruses that had plagued our poor computer! My co-worker had been
excitedly telling me all about his iMac. I had to check it out. What did I
find? More features, free training, free support and better quality than I
had expected. More value for my money than anything else I had compared."
Now, Jason owns not only one, but two Macs and an iPhone.
Yes, Jason has become a loyal Apple fan. But, they've earned his loyalty!
Times Have Changed
Recent reports of economic indicators hint at modest, yet sluggish signs of
economic recovery in GDP, consumer spending and corporate profits. The good
news is, the economy is beginning to grow. The not-so-good-news is that
growth will be slow, taking longer for your profits to recover.
In good times, customers were almost a dime-a-dozen. In this climate,
customers are more like 'few-and-far between'. Keeping the customers you
have is more important than ever.
Follow the 5% / 75% Rule
Research finds that a modest increase in customer retention can turn into
big profits! Successful companies report that a retention rate of even 5%
can pay back as much as 75% in profits over the life of the customer
How does that work? Over time, loyal customers will continue to buy and even
spend more across your product lines, just like Jason. Meanwhile, the cost
to serve and retain those loyal customers decreases. As a result, profits
and overall customer lifetime value increase exponentially.
How do companies achieve results like these?
How do successful companies extend the customer lifetime value of their
Successful companies have a clear understanding of how they add VALUE to
create strong, loyal customer relationships.
Turning Retention into Profits
Understanding how to add real value to customer relationships begins with
seeking meaningful customer insights, allowing you to set the right
priorities that return significant payback.
Value relates directly to what customers care most about. And, what
customers care most about is directly related to what they need from you.
For consumers, value often means providing products and services that "make
my life easier." Business-to-business relationships need partnerships. Your
goal is to help clients successfully serve their customers to grow their
companies. Ultimately, your customers' experiences will determine your
ability to retain the relationship and grow lifetime profitability.
Let's look at a simple example
Are you a coffee lover? If so, you may frequent Starbucks or your favorite
local coffee shop. Coffee lovers demand high quality flavor and freshness, a
mouth-watering aroma, and want their coffee served piping hot. But,
convenience, without sacrificing the quality of each cup of coffee, is also
important. These are fundamental requirements for coffee lovers.
What would make you pay a premium price for a cup of coffee and return again
and again? First, Starbucks knows it must nail these fundamental
requirements every time. But, Starbucks also knows they must take these
customer requirements a step further, giving you something more that will
keep you coming back.
To hook you, Starbucks has created a powerfully unique multi-dimensional
customer experience. You know that 'this cup of coffee was made for me just
the way I like it". And, you're served in a friendly, respectful and 'glad
you are here' environment. Starbucks takes each Value Producing Opportunity
(VPO) and delivers them consistently across each critical dimension.
When focus is on 'customer first', strong business results follow. Starbucks
is the model of service and loyalty for not only coffee shops, but for many
other companies and industries worldwide.
What are your VPOs?
What can you do to add "real value" and move customers along the continuum
from "engagement" to "satisfaction" to "loyalty"?
Start with a 7-point assessment to help pinpoint your loyalty and Value
Producing Opportunities (VPOs). You probably don't have the answers readily
available. Assemble the right team of leaders to champion this
self-assessment. Customer insights and an honest self-examination will be
key to your process.
1. How are satisfaction and loyalty defined or characterized by your
2. What does value mean to your customers?
3. What are customers' expectations of you?
4. How does your actual performance compare to customer expectations?
5. What are the factors that contribute to your current performance levels?
6. How do you compare to the competition in the eyes of your customers?
7. What are your significant value producing gaps?
Answers to these questions are fundamental to the future potential of your
company. These insights will reveal your Value Producing Opportunities. Use
these insights to determine where to focus your resources for potentially
As you identify your VPO gaps and focus your improvement efforts, make sure
-Prioritize your Value Producing Opportunities – pick 2 priorities to focus
-Select the right project team – assign senior leaders as champions
-Establish a project discipline & accountability - Lean Six Sigma principles
provide a consistent project structure to help you drive progress.
Keep your eye on the target: Follow the 5% / 75% Rule
Follow these simple reminders to turn your retention efforts into big
-Be a valuable resource – Stay focused on what customers need from you and
be relentless in exceeding their expectations
-Be easy to do business with – Don't make customers jump through hoops.
Ensure your business processes are simple and high quality.
-Be timely – Don't make customers wait. Prevent long waiting lines. Be on
time for scheduled deliveries and service calls. Schedule appointments at
times convenient for customers.
Your customers are your most valuable assets. Your most efficient way to
grow is to keep the ones you have. Customers vote with their feet... they
take their pocketbooks where they get the greatest "value" for their money.
Make sure they continue to vote with you!
About the Author:
Vivian Hairston Blade is President & CEO of Experts in Growth Leadership
Consulting, LLC (EiGL). Her professional certifications include GE Certified
Lean Six Sigma Master Black Belt, Black Belt, and Green Belt, and Certified
Net Promoter Associate. Through a combination of coaching and training, EiGL
Consulting helps Fortune 1000 companies execute value-based strategies by
building high performance, high quality, and high service-level
organizations. For more information, please visit:
www.eiglconsulting.com or contact: