Feature
When happy isn’t enough
A company’s growth depends not only on new business, but also on its ability to retain and develop existing contracts. Contract retention is the foundation upon which growth is established. Some companies plan for at least 10% lost revenue each year, and then expect their business development teams to recover that loss with new wins. This is like pouring water into a leaky bucket. Instead, companies should change their practices to plug the holes first.
Even happy customers
can defect Suppliers that are unhappy with their incumbent suppliers are likely to eventually seek a new supplier. In short, dissatisfaction often drives disloyalty. However, the reverse is not true; satisfaction does not always lead to loyalty. Satisfied customers can still defect, sometimes for reasons you can control and sometimes due to circumstances outside your control. More often than not though, contract losses are due to factors that service providers could influence, but only if the right processes are put in place to identify and manage them beforehand.
Managing loyalty as
a process Client retention must be recognised as a priority and managers at all
levels must understand their role in managing it. As such, there are four key steps that service providers should follow to manage customer loyalty effectively:
Develop a contract risk register A contract risk register allows providers to measure the relative security of each contract and, in turn, will help to prioritise efforts. Using this system, each contract can be scored using measures such as contract size, margins vs. average, time to expiry and growth potential. These scores should then be combined with an objective, survey- based measure of client loyalty to provide an overall risk rating for each contract.
“More often than not, contract losses are due to factors that service providers could influence.”
Draw up retention plans Using the risk register, develop account-specific plans that explain the account situation, the relationships, the nature and quality of the service. Crucially, the plans should also define attributed, timed actions that are needed to reduce the risk of contract loss.
Implement the retention plans Action is often required in a number
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As client retention continues to be a key driver for service providers, effective customer relations have never been as important as they are today. Andrew Shaw, Managing Director of Business Services Growth (BSG), offers practical advice on how service providers can ensure that customers are not just happy, but loyal too.
of areas, such as: strengthening client relationships; developing new relationships; clarifying the customer’s priorities; improving service quality; preparing for a re- tender; or developing a new, pre- emptive commercial proposal.
Track progress and results Finally, regular reviews are required to update the risk register, track actions and plan for the following period. This review should include a dashboard of key retention metrics such as retention rates and forecast losses.
The result By following this process, service providers will see a significant improvement in contract retention rates. One major soft services company used this process to reduce their contract losses by £54million per year. Much of this benefit came from more proactive management of service issues, identified by gaining objective feedback from the clients themselves. The priority was to identify unhappy customers, however, we also found that it takes more than happy customers to plug the holes in a leaky bucket!
www.businessservicesgrowth.com
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