Most businesses are facing sales and revenue challenges caused by inflation, supply chain disruptions and spending cutbacks by customers. While it is typical for companies to focus on growth during economic expansions, economic contractions are the ideal time for businesses to optimize their operations and process efficiencies. When growth stalls or even contracts, businesses must find ways to operate as close to 100% efficiency as possible. This is the right time for every leader to align their team’s focus on operations to improve efficiencies and their core operating KPIs. This helps businesses manage through challenging times, and to build a stronger and more efficient foundation so profitability can increase when growth returns.
Targeted Investments to Increase Profitability
Investments that improve customer satisfaction and customer retention sit in a sweet spot, delivering short-term benefits that are needed when new customer acquisition shrinks, and long-term revenue and profit gains when customer acquisition picks up.
Improve Customer Satisfaction
Increasing customer satisfaction creates direct benefits in increased retention, net promoter scores, recommendations and referrals and typically lower support costs. The quickest way to improve customer satisfaction is to increase your understanding of what your customers value, deepen your understanding of the challenges they are trying to solve or benefits they are looking to gain from your products or services and find additional ways to deliver differentiated value.
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You can assume that many of the same challenges that the slowing economy has created for your business are also being felt by your customers. Engaging directly with your customers through surveys and other feedback channels can help you gather quick insights into the challenges your customers are currently facing and uncover unmet needs they are still looking for solutions to.
Increase Customer Retention
One of the largest costs in most businesses is customer acquisition cost, or CAC. Increasing customer retention creates financial leverage, accelerating revenue growth without a simultaneous increase in CAC. This translates directly to increased free cash flow and profitability and explains why increased customer retention is so desired by all businesses.
Your business environment is changing rapidly and facing new challenges so having an open mind to new insights into customer churn is essential.
For example, subscription businesses whose customers use credit cards for payments are often surprised that up to half of their customer churn is not caused by customers who are dissatisfied choosing to end their subscriptions, but rather by issues in the payments system that prevent legitimate credit cards from completing their transactions. This is called involuntary churn because the customer is not intending to end their subscription.
At FlexPay, we help companies reduce or eliminate one of the key drivers of customer churn in subscription businesses by solving the card industry problem of failed payments, which helps our customers reduce up to 48% of their customer churn. It is surprising when we first engage with new customers that involuntary churn is not often recognized as one of the largest drivers of customer losses. A failure to recognize the problem means the scope of the problem is not accurately measured, and the proper technology is not used to minimize its impact.
Improving customer retention and satisfaction is twice as critical now than during times of high growth. Increasing your operating efficiency now will help you weather the current economic downturn and help position you to outpace your competition when your customers start to increase their spending again.
