Retention and acquisition both deserve attention and intention
More, more, more – acquire more new customers and move on to continuously acquire some more new customers. This sentiment around new customer acquisition encompasses virtually every industry. But what if we shifted the underlying idea here? What if we focused as much - if more energy on retaining customers as we do on attaining them? The goal isn’t to merely chase new customers. It’s to make your existing ones so happy that they bring the next wave of new customer in for you.
This is exactly what I tell my colleagues. Bluntly put: we shouldn’t only rely on chasing more butts in seats. We need happier butts that come back sooner and frequently. Its way harder (and way more expensive) to bring in new guests than it is to take care of the ones already sitting in front of you. It’s practically written in stone…alas, many operators in the hospitality industry appear to be “stone deaf. To drive this point home, consider the following:-
It’s 6x-7x more costly to acquire than retain customers, and by boosting your retention rate by just 5%, you can drive 25%-75% more profit.
Loyal customers spend 31% more with a brand than the average consumer.
You have only a 27% chance of a customer returning after one purchase… but a 54% chance of them returning after a second or third purchase.
These statistics reaffirm this essential truth: retention deserves attention and intention…at least as much as acquisition. This then begs the question: Which is more important? Here’s the thing about retention and acquisition: they’re two sides of the same coin, not rivals - they’re teammates. Like fries and ketchup, these two strategies work best when they’re together, each contributing to the growth and success of your business. While there is no one-size-fits-all approach, finding the right balance between the two is important to ensure your business thrives in the long term. So, both are important, and yes… keeping the right customers is valuable.
Just as much as organisations track employee attrition, (where once again, retention merits attention and intention), one of the key metrics in understanding whether your hotel is retaining customers is customer churn rate. But what exactly is that? And how to do companies use it? The primary mistake companies make is to look at churn as simply a number or metric rather than as an indicator of behavior. When the numbers are small no one pays attention – they do, only when it is high. Analysing what’s behind the number will help you determine what to do to change it. That includes questions such as “What are we as a company doing to cause customer turnover?” “What are our customers truly seeking?’.
Another mistake is when organisations fail to recognise that a high churn rate is due to customer acquisition efforts that are driven heavily by offering high discounts. Offers that attract the wrong kind of customers. One observes this in hotels that promote price reductions - resulting in attracting deal seekers who then leave quickly when they discover a better deal with another hotel. Those deals may have helped companies bring on new customers, but they were typically high-churning customers who didn’t stick around to make another purchase when a heavy discount wasn’t offered.
The objective is to bring in and keep customers who you can provide value to and who are valuable to you.
Shafeek Wahab – Editor, Hospitality Sri Lanka, Consultant, Trainer, Motivational Speaker, Mystery Guest Auditor, Ex-Hotelier
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