Many Happy Returns 2007

Boris Bugarski

If you haven't heard about Customer Relationship Management and Retention, you may be a bit behind. Larger companies around the globe spend a lot of money to ensure that their customers are managed properly, and that communication with them is constant.

Certain statistics remind us that customer relationships and retention are key to the success of full-service restaurants, too. Here's some perspective on these "statistics" so that you may have the insight to move your dollars around to create longer-lasting, profitable relationships.

The 80/20 rule.You've heard this before: 80% of your revenue comes from the top 20% of your customers. As an analogy the other day, I explained to a bar owner that the reason that "dive bars" stay open for years is that the same people are always there–6 a.m. or midnight. They are responsible for turning on the lights, paying the employees, salaries, rent and more. It's these loyal patrons that really keep a business–well–in business.

But, just because they are loyal doesn't mean that they'll always return. Think back to how many people have given you their cell number to put in your mobile phone. Take a guess about how many people you have on record in your cell. Now, consider how many you regularly call–I'd guess about 20%. And these top relationships are probably the people who visit, call and treat you to lunch on a regular basis.

The reason they are still your friends is that you are in constant communication, reminding them just how important they are to you. The point here is that true retention of relationships is due to communication and reminding people of the value they bring to your life or business.

Existing customers can spend up to 67% more than new ones.When you first visit a restaurant, what do you order? Imagine you and a friend walking into a new eatery and looking at a menu that may offer an unusual item. Most people are a bit timid and prefer to stick with something common or food they are already familiar with. Have you ever gone to a restaurant and been handed a menu full of items you couldn't pronounce? I'll bet you had the chicken.

As new customers we can be shy about exploring the menu in search of something new, especially if we haven't had a particular food item before. However, as we continue to frequent the same places, we're willing to try new things and "work" around the menu. In time, we even take suggestions from the staff and, naturally, increase our tab with the new items.

Patrons start off slow and tend to increase their spending after many visits. Relationships like these are built gradually, with confidence and communication.

It's five times more expensive to acquire a new customer than keep an existing one. New customers are expensive to acquire–period. When you take into account advertising such as TV, radio, newspaper, mailers and other direct marketing, the costs add up when you consider the average response rate is 0.05% to 2%.

Yet consider the true, lifetime value of these customers. It includes referrals, impulse buys and influencing of peers.

But the question isn't how much does one customer cost to acquire; the question is what are you doing to build a relationship with that customer to realize his or her true lifetime value? It's nice to pay the price for new customers, but even nicer to pay a price to keep them for good.

A 5% increase in customer loyalty can increase revenue up to 125%. If the bottom 80% are not affecting your bottom line often, and the top 20% are keeping you in business and spending up to 67% more, then increasing your top customers to 25% should dramatically affect your revenue. All together, this looks like a great way to increase profits in the long run.

As these "statistics" show, you need to realize the impact of customer communication and loyalty, and integrate them into your business philosophy and marketing strategies today.

Boris Bugarski is CEO & president of mUrgent Corporation. Reach him at 877-289-7250 or at bbugarski@ murgent.com