Customer retention increases in importance

Banking businessman Vernon Hill, founder of Metro Bank is famed for his book and strategy of having fans not customers, which went on to be his 2012 book of the same name.  Hill's tome encourages businesses to compete on service rather than price.

Organisations competing on service instead of the price are more likely to retain customers.  Research by management consultancy Bain & Company found that in financial services a five percent increase in customer retention delivers a 25 percent increase in profit.  For technology companies to retain customers is hard. There are of course fanboys such as those who wax lyrical about Apple or Slack, but for many technology companies retaining customers is tough. Part of the challenge is the pace of change.  

But despite its challenges, customer retention is set to be vital for technology marketeers.  Retention is really about the relationship between the customer and the supplier. In the not so distant past technology software suppliers shipped an application or hardware and had little to with the customer again until it was time for a renewal of the licence agreement. Talk to business technology leaders about one supplier of major database and business process services and the response is far from positive, with their brand associated with indiscriminate price increases, unfriendly negotiation tactics, high use of lawyers and additional features that are not representative of the needs of their organisations.  

Sadly, the tactics by some titans of the technology sector have given members of the leadership team outside of technology a poor perception of dealing with IT suppliers.  As technology impacts every area of the organisation and businesses adopt cross-functional teams, whereby IT systems and services are selected by business lines teams in conjunction with IT, the need for good relationships is vital.  Research into customer retention finds that retention begins with the first contact.

"We do work with both our partners and customers to ensure retention which is why we have long term relationships," Anna Cobbett, Head of Sales and Marketing for Alchemmy, a technology management consulting organisation says.  

Scoring the interaction

Marketing has relied on the Net Promoter Score methodology, but increasingly technology marketing requires a more granular and nuanced approach to understanding its relationship with the customer and why they remain or churn to another supplier.  

"I am currently building a reference program and feedback," Cobbett at Alchemmy says.  Cobbett says the reference program will create a process driven approach to marketing and customer retention. Cobbett is amongst a growing trend of marketeer in all sectors who are focusing on high level direct interactions with customers on a regular basis. In some sectors this is on an annual basis or every six months.

One advantage technology marketeers have over their peers in other sectors is that the technology logs usage and gives marketeers data from which to begin to build a picture of customer retention.

Infrequent or non-existent usage of an application is a sign that a customer may churn. Technology marketeers can log this information and feed it into the customer relationship management (CRM) tools.



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