The Customer Retention Formula for Best In Class Results
Customer retention formula = S.E.R.V. These are the four letters that are the basis for the long
term success of your business. These letters represent four key points that
will keep your phones ringing and your revenues rising.
S.E.R.V. is an acronym for the customer retention formula, which
supports the notion that customer service is key to customer retention
and business growth.
The principles of the S.E.R.V. customer retention formula is very simple. Bottom line, without customer service, there are no customers to serve and therefore no business. So it is imperative to monitor customer retention levels closely and work quickly to turn around any negative trends. As we state so often, leaders must continually inspect what you expect when it comes to customer service.
To keep your current customers and attract new ones, you have to keep your customer service standards at the highest level possible. It's a fact that many customers will go where they feel the most "cared for". Despite what you might think, price is not always the most important thing in the minds of many consumers. Many customers are willing to pay more for a better customer experience.
Take care of your customers and they, in return, will take care of you.
Never allow your organization or team members to lose sight of the customer experience. Often it's the little things that make all the difference to the customers. For example, customers want to shop where they feel safe; where it's clean; where staff are friendly; where they're always greeted with a smile; where employees know their name; where management is visible and actively working to improve the customer experience.
"As we lose ourselves in the service of others we discover our own lives and our own happiness."
- Dieter F. Uchtdorf
When customers know they can easily return an item with no hassle, they are more likely to make multiple purchases. While this may increase the number of returns the business has to process, the goodwill and trust built with customers is well worth the added effort.
Next, let's take a deeper dive into the S.E.R.V customer retention formula, which is solidly based on providing the best customer experience possible.
Customer Service Formula = S + E + R + V
SERVE your customers.
Too many companies lose sight of this one basic point. Eventually, these organizations end up paying a stiff
penalty as customers find new and better options to fulfill their servicing needs.
Your customers must know that when they walk through the doors of your business, they will consistently receive your undivided attention and an overall great experience. A consistently positive customer experience will not only have customers returning, but will
have them referring their friends and family, which is how any business can experience exponential growth.
This is why it's so important to take the time to break down and explore each part of the customer retention formula. So let's keep going...
ENGAGE your customers.
Connect with your clients multiple times per year.
Make the effort to reach out to your customers at every possible
opportunity. Make certain that during each communication you have the customer's needs top of mind. Show up with a purpose to add value, even if that purpose is just to make sure the customer is receiving everything they need from you - let the customer know you care.
Know the names of your customers. Know their likes and dislikes and know a
little about what is happening in their lives. It's not difficult, it
just takes a moment of actually speaking, listening and paying attention
to what they say when they approach the counter. Have systems in place to capture information about customers so that each time you meet you can be reminded of your prior conversation, which says to your customer that what they are telling you is important to you.
This part of the customer retention formula is critical. You cannot overstate the importance of
building a strong connection with your customers and the only way to do that is to regularly engage with them. Having a solid connection is what keeps customers loyal to you and your company.
RELATE to your customers.
Let customers know that you understand
their needs and that you are determined to meet or exceed their
expectations. Ask probing questions to better understand what is important to the customer. As they share vital information with you, share something about yourself that provides evidence you can relate to what the customer just shared with you. In order to build trust, you must relate to the customer in some way.
By not taking the time to relate to customers, you are showing indifference to your customers, which will only have them turning to your competitors who exhibit the respect and validation your customers seek.
Let your customers know how much you appreciate their business.
People want to feel valued. If they feel taken for granted and
unappreciated, they will be an easy target for your competition. So, are you going to allow your customers to help grow your competitors business or your business?
VERIFY it's working.
Following up with
your customers is critical to maintaining their loyalty. Be proactive in asking customers directly how they perceive the quality of the service they are receiving. Ask if there is anything you or the business could be doing to make their experience even better.
customer service surveys. Perform mystery shops. Conduct courtesy calls - do whatever is
necessary to keep the communication flowing and customer feedback streaming in. Track and report on key customer service metrics. Continually analyze the data and make adjustments to fine-tune and improve the service experience.
"Without service, we would not have a strong quality of life. It’s important to the person who serves as well as the recipient. It’s the way in which we ourselves grow and develop."
- Dr. Dorothy Height
Other Important Customer Retention Formulas
In addition to the S.E.R.V. customer retention formula, there are three key metrics that are specific to measuring customer retention.
- Repeat Customer Rate = # of Customers That Purchased More Than Once / # Unique Customers - customers buying multiple products and services are indicative of customers who have a strong level of customer loyalty. They love your products and they strongly support your business, so it's important to keep these clients happy by letting them know how much you appreciate their business.
- Purchase Frequency = # of Orders Placed / # Unique Customers - the higher the number of repeat purchases is a positive reflection on the customers perception of your products and business. The more customers keep coming back, the better your customer retention rate will be.
- Average Order Value = Total Revenue Earned / # Orders Placed - highly satisfied customers aren't always looking for the least expensive product. Great businesses that provide excellent service can place a premium on that service and may be able to increase prices without losing customers to the competition.
In an earlier article, Tracking Customer Service for Improved Results, we also provide a list of additional customer service metrics for business owners to continually review.
More Customer Service Articles
View All Customer Service Articles