We have interviewed Klaus Lund who has given us some valuable take aways on how to work with customer retention. Klaus is the founder of Klaus Lund & Partnere ApS and is one of the most experienced professionals in Denmark in the field of customer orientation. Klaus has worked with a number of household names helping them to develop a healthy top line through customer satisfaction.  

Klaus-how big an unlocked Customer Retention potential do you typically see in companies when you start working with them?

In classical loyalty theory, there is a lot of talk about Customer Retention and to what extent customer loss can be brought down? In practice, however, it is my experience that the potential when you start working with Customer Loyalty is typically in 2 areas:

• Customer Retention

• Increased Share of Wallet i.e. additional sales to existing customers

 Realistically, companies can typically reduce their customer churn by 25-50% i.e. if they have a customer churn of 10%, it can typically be brought down to 5-7.5%.

However, it is equally interesting to look at how the development of Share of Wallet can increase revenue and here the potential is typically 25-33% increased revenue for existing customers. F.ex. analysis (Temkin Group) shows that if customers went from being satisfied = score 7-8 in NPS (10 point scale) to being very satisfied = score 9-10 then the probability that customers will try a new product /service, right when the company launches it, increases from 29% to 61%. I.e. by increasing customer satisfaction the probability doubles.

What I call the ”hidden” customer churn contains another huge potential.

Many companies only measure their customer churn when their customers have left, while by far the biggest decline in revenue is most often due to the customers buying less than before. So, a clear recommendation is that you should try to have some KPIs that measure the Share of Wallet with customers.

What do you think has kept companies from working dedicated with Customer Loyalty?

There are typically 2 reasons why top management has not focused even more on Customer Loyalty :

• One reason is a lack of awareness in a broad sense and too little focus in general on measuring Customer Satisfaction

• The second reason is that you do not have the right KPIs for management reporting. In general, there are many who ”just” have an NPS (Net Promoter Score) number f.ex. that you have an NPS of 22 or that you measure the average Customer Satisfaction i.e. 7.7 on a 10 point scale. I typically recommend that you also get reported how the spread is divided into 3 categories: the dissatisfied customers = score 0-6, the satisfied customers = score 7-8, the very satisfied customers = score 9-10. This makes it possible much better, not only to work on bringing down the number of dissatisfied customers who will typically churn sooner or later if you do nothing, but it also makes it possible to work systematically to bring the number of satisfied customers up to the category of very satisfied customers, thereby increasing both their Share of Wallet and their ambassador degree, i.e. willingness to recommend the company to others

How do you start working with Customer Retention when you start from an empty page?

When I start a Customer Satisfaction development process, I always start with the top management and a workshop with them where a common language and a few tools for further improvement work are established. One of the very important parts of this top management workshop is the focus on the business case of increased Customer Retention and increased Customer Loyalty. If possible, we use the company’s own data. It is very often an eye opener for top management when they see the spread on their NPS measurements i.e. the breakdown of dissatisfied, satisfied and very satisfied customers.

 At the top management workshop, I also show several practical examples of Customer Journeys and what it means in practice to be an “Outside-In” thinking company, whereby top management often sees their company from a more customer-oriented angle.

Klaus – please share with us some of the best cases you have seen on extending the customer lifetime…

 I typically see 5 areas to focus on for increasing the company’s Customer Satisfaction as leading directly to longer Customer Lifetime – these are the 5 I typically recommend:

1.  "Easy to do business with” – it should be easy to do business with the company.

2. ”The Time factor” – you must be aware of everything that has to do with waiting times, delivery times etc. as it typically affects the customer experience quite strongly.

3. ”Manage the expectations” – It is important to manage and align expectations with customers.

4. "Classical service behaviors” – this focus area is about the employee’s communication with customers in the” Moment of Truth” and thus about classic service virtues such as e.g. body language, presence etc.

5. ” Making service visible” – You can work systematically to make a good service visible – one of the most classic examples is the folded toilet paper on a toilet roll in a hotel where they fold it to show that they ”have been here” today

What obstacles do you see in getting the right data – and how do you fix them?

If top management seriously wants data and KPIs on Customer Satisfaction including correlations to customers’ financial interactions with the company (fx. revenue) then it is usually more hard work, than it is a real problem to get the right data.