Increasing Customer Retention Rate: VIP Customers

Every now and then I’m going to be taking a look at some quick and practical ways in which you can make progress towards retaining more of your customers. Today we are going to focus on the VIP method, where you find your most valuable customers and give them priority and preference, and generally treat them like they are the most important people on Earth.

The 80/20 rule

The Pareto Principle

This is a simple rule, known as the 80/20 rule or The Pareto Principle. It means that, for most things in life, around 80% of the effects come from just 20% of the causes.

Another way of looking at that is ‘for every 100 clients you have, 20 of them will be responsible for most of your revenue’. And it’s true.

Try it out now. Look through your client list and see which clients come with the biggest fees/payments. I guarantee that most of your money comes from 20% of your clients.

That 20% of your clients should be treated like VIPs.

The 80/20 rule is important because it focuses your mind. That 20% of the client list deserves the most attention from you. They give you the bulk of your money.

Making the clients feel like VIPs

Your first job as a freelancer is to make sure that, with your VIP clients, you move Heaven and Earth to keep them happy. You do everything you possibly can to ensure that they get the work when they want it.You bend over backwards to meet every possible request on any brief they give you. In order for them to stay with you and keep giving you the fees they do, you make them feel like they are the only client on Earth.

For example, send them flowers on their birthday. Make sure they are the first to get a discount when you send out your next cycle of discounts. Send them personalised, handwritten notes that say thank you every now and then.

That part about giving them ‘first dibs’ when it’s discount time is a major point. Everyone has been pleased to get a VIP privilege discount flyer through the post, from that store in town you like to buy from. And those little pieces of card that you get at coffee shops where you can build up loyalty points for discounts? They’re popular for a reason.

The Pareto Principle

Of course, every client is important, but focusing on giving the very best treatment to those clients who are worth the most makes sense. You rely on them and their custom to carry the bulk of your business.

Look at your current client list and work out how much money they bring in on a monthly basis.Then look at each individual client and work out the percentage of that money that they are responsible for.

You will soon work out who the VIP clients are, and while they may not amount to an actual 20% of your client list, they will certainly be responsible for 80% of the income.

Stick the VIPs on their own list, and make sure those clients are the first ones you go to when you’re launching a new product/service or marketing campaign. Ensure they get discounts first (as exclusive clients).

They are your most important clients, and by treating this very special group of clients as VIPs, you will enjoy their custom for years to come.

Stick around, and if you’d like to get my posts as soon as they come out, subscribe and/or follow me for more advice on client retention. And if you want a little bit of extra help finding clients on LinkedIn, try Dux-Soup.

Why does customer churn happen (and what can I do about it)?

As a freelancer or small business owner, it can be very challenging to manage all the aspects of your business. And some of those aspects can be easy to miss too. We looked at customer churn in a previous post, and in this post I thought I would take the time to work out why churn happens. If you are concerned about churn (and I don’t believe that there are many people like us who aren’t), then take a look at the following areas where it can start to grow, and then become a problem. Then, work on ways to avoid the areas.

Money as the cause of churn

Yes, it’s often about the money. People may use your products and services for some time, and then realise that the company on the other side of town can give them the same thing, but cheaper.

There is really only one approach you can take with this. If you are able to provide value for your customer, they will find it harder to jump into churn. Even if the guy down the street is selling website copy for half the price you are, if you’re better, more responsive and careful in your work, churn can be avoided.

Money is a major factor in churn. And with the competitive marketplaces today, that’s understandable. But there is a reason why people still shop with a brand that is more costly than the rest. All you need to do is work out why you are worth what you say you are. The rest should fall into place. And you may reduce churn.

Bad product fit causing churn

You may have a very good sales process (as a freelancer) or team (as a small business), and that may result in lots of sales. But if the product or service is not a good fit for the customer, they won’t come back.

Good sales people qualify clients. Only when they know that their product or service will genuinely help that client do they start to sell. I once had an experience where I hired a ‘specialist’ sales team to find me leads. I ended up having a coffee with a ‘lead’ who explained to me that the sales team hadn’t let him speak during their conversation. He had felt intimidated. On top of that his business was going under and he had no need for content for his website.

The sales team had pummeled him with great selling (or at least very ‘firm’ selling). If they had closed on that phonecall, he would have spent some time as my client (perhaps), but would have gone into churn as soon as the first poorly-qualified service had been experienced.

Qualify who you are selling to. If they genuinely need your product, and they’re a good fit for it, sell it. If not, walk away, because they’ll churn away quicker than you can say Glengarry Glenn Ross.

The product isn’t working

Okay, selling your product is one thing, but it’s equally as important to ensure that what you sell is working in the way your clients want it to.

As a freelance graphic designer, for example, you may have to spend ten hours trying to get the exact right shade of yellow. But you’re putting in that time for a reason. Your client wants that shade, otherwise the product ‘doesn’t work’.

A freelance writer may have to produce ten high quality blog posts that help to market the services of a client. But unless that writer explains exactly what the client can expect, there could well be some disappointment. It’s not always easy to explain why blog posts don’t immediately make clients money, but it does need explaining.

If you design software or apps, carry out on boarding, so your clients get to know how to work with the product to meet their goals. Make instructions clear. Set up a communication channel so that they can contact you if they need to with any problems that occur after purchase. Include a chat feature on your website.

Basically, if your client discovers that what they have bought doesn’t work, they won’t come back/continue subscribing.

Churn due to poor customer support

Things do go wrong and problems occur. This is especially true if you’re offering a subscription service for example. As problems occur, customers expect full and efficient customer service.

The customer support you offer needs to be everything customers expect it to be. There should be humans (preferably trained) at the heart of it all, able to take questions and manage them in minutes.

Customers will leave if support is not there.

Churn due to your competitors

Your customers may look at your competitors and believe (rightly or wrongly) that they can give them better results, or a better product or service overall. While this may not be true, if they feel it is, this is as good enough a reason to enter churn as any other.

I dealt with the money thing earlier in the post, but one way to help your clients understand that your product or service is worth sticking with is to consistently focus on your USP (unique selling proposition).

What can you offer that those pesky competitors cannot? What one thing do you bring to the customer experience that no one else does? Putting money aside, what do you do that really helps your customers and clients?

Do you care about your customers, and show this through your marketing messages? Are you funnier than your competitors? Do you have the very best customer service known to man? There must be something that you can articulate, which shows that you are better than the next provider of your particular product or service.

Churn is manageable

Hopefully, you have learnt that, while churn is inevitable, it can be reduced and limited. Putting into place any of the ideas above should allow you to limit the number of clients that want to leave your care.

And that word, ‘care’, is important. Find ways to care about your clients more, even just 10% more, and you should find that churn is less of a beast than it is right now.