It doesn’t take a genius to understand that customer satisfaction plays a major role in the overall health of a business. However, during an economic downturn, maintaining client loyalty and retention rates can be the difference between sink and swim. Existing customers provide a critical source of revenue when new acquisitions are few and far between.
At a time when most business leaders are looking for ways to cut costs, proving your organization’s value to clients can help you avoid the chopping block. This is where it pays to show sympathy for each customer’s situation and stay flexible about your offerings in order to keep clients on board. There are plenty of strategies to boost customer retention during a recession; in particular, discounted services, free trial offers, and simple relationship-building can all make a difference.
But maintaining customer satisfaction is still a balancing act. Obviously, you don’t want to invest too much time and money into clients that aren’t bringing in significant profits. And in a recession, when your own company’s economic standing may be fragile, you need to be careful about where and how you leverage discounts, offers, and other retention strategies.
If you’ve read the other KPI blogs in this series, you can probably tell where we’re going with this. (If not, check out the Engineering, Marketing and Financial, and Professional Services KPIs blog posts for more insights.) Precise, customer-focused metrics can help you better understand where clients’ heads are at and how much effort it’s requiring from you and your employees to keep them. And when you do implement strategies to bolster customer loyalty, you’ll be able to track whether or not they’re having an impact.
Specifically, measuring customer retention, costs, risk, and support team performance can provide valuable insight into enterprise health. Here’s why those metrics count.
We can’t stress enough how important it is to include client retention initiatives in your recession survival strategy. However, these strategies should be built with an understanding of how well you’ve been able to maintain client relationships in the past.
Retention rates measure your company’s ability to keep customers over time. The length of time typically varies by industry — for enterprise software makers, it’s usually a yearly measurement, whereas for consumer solutions, it’s often monthly. During a recession, however, you may want to take more frequent measurements (monthly instead of quarterly or yearly, for example) so you can see how the economy is affecting customers.
Regardless of what your business does, you should be able to measure retention rates since your company’s inception. You need an answer to the basic question, “Of the customers I started with, how many are left?” Of course, if certain customers generate a large percentage of your total profits, you may want to calculate this metric based on revenue rather than number of customers.
Cost to Support
As you build out customer retention strategies, another key metric to consider is each customer’s cost to support — in other words, how much you spend on different customers. To obtain this metric, you need three things: the total cost of support labor, the resources you expend, and the number of customers you serve. A very generic cost-to-support metric can then be obtained by adding together labor and resource costs and dividing that number by the total number of customers.
General numbers like this can be useful, but if you’re looking to shave costs, you want to be able to break out cost-to-support numbers by customer type. For instance, you might separate accounts by product or service, size, industry, or any other category you think might be useful to assess. You can then perform the same calculation for each type of customer; in other words, add the per-client-type costs and then divide by the number of clients of that type.
Why is this metric so important? It offers a more accurate way to calculate the lifetime value of a client, and it can shine a light on the customers that may be draining resources. Customer bases that are extremely resource- or labor-intensive might be a good place to look when you’re thinking about cutting costs.
Support Performance Metrics
On the other side of the equation, you also need to be able to determine how effectively your client management and support teams are performing. If employees are not able to identify, respond to, and resolve errors in an efficient way, then support costs may lie with your internal team rather than with the customers themselves.
Specifically, you want to be able to calculate the following:
- Support response time. This metric quantifies how long it takes support teams to begin work on customer issues. It’s typically measured as the average time (in minutes, hours, or days) from when a customer reports an issue to when a team member first begins working on it.
- Time to resolution. Your resolution time is just what it sounds like: the length of time until the support ticket is closed and the issue is considered resolved. In order to be valuable, time-to-resolution metrics should be broken down by issue severity and by customer.
Customer Satisfaction and Engagement
Happy clients are your business’s most valuable asset. However, it’s not enough to simply sense that clients are satisfied. You should be seeking out hard metrics to prove it and continuously analyzing performance to see where you can improve.
- Customer satisfaction surveys. Customer satisfaction (CSAT) can be measured by conducting short surveys with existing clients. There are many ways to do this, but most organizations choose to issue surveys immediately after a customer interacts with a support representative, such as after a ticket is resolved.
- Net Promoter Score®. Net Promoter Score (or NPS®) is one of the best ways to measure the overall engagement and happiness of your customer base. In order to achieve a good score, organizations must receive very high marks from customers, which makes it an incredibly useful tool. It is also one of the foremost standards in measuring customer satisfaction, enabling your company to compare/contrast to others who publish their scores.
Customer Risk Score
In addition to assessing your organization’s health, you also want to be able to rate the financial viability of your customers. If key clients are in danger of folding, your business could potentially take a big hit as well.
There are many factors that can be included in customer risk assessments, but one of the most valuable is client credit reports, which can be obtained by engaging a corporate credit rating agency. These reports will tell you, among other things, each customer’s credit rating and their payment history. Most agencies offer monthly lookups so you can frequently evaluate risk as market conditions shift.
Precision metrics like these require deep insight into the efficiency of your company’s workflows and billing hours. But when you are busy attending to clients, you may not have time to track them manually. Journyx’s time tracking software takes the guesswork out of these measurements — and the work out of gathering data — by tracking and reporting labor hours and expenses by project, customer, team, or even employee. Journyx will help you accurately forecast your company’s health as you forge your way into a more secure economic future. Visit www.journyx.com to learn more.