In this last post of the series on contract retention, I want to wrap up our journey so far by setting out 10 not so apparent benefits of getting contract retention right. These are ones over and above the obvious in terms of defending revenue and margin.
This series has been about the benefits of retaining long term supplier contracts. As the incumbent provider you should have a wealth of information that your competitors do not. You should have an intimate working knowledge of your Clients needs, together with what you have been delivering. You should have a history of value add initiatives as well as Customer satisfaction data. Above all else you have the advantage of understanding the intricacies of delivering day-to-day operations inside your Clients organisation.
Having said all this, you must consciously avoid any form of complacency or assumption of an advantage being the incumbent. Never assume that because you already deliver the business, you can sit back and not worry about the rebid process. You must focus on renewing your knowledge of the Client and discovering what, if any, changes they miss may wish to implement in the new contract.
In addition to this, a cardinal rule, never re-estimate based on your existing contract. The Client may not have introduced major changes to their requirements BUT they will want to see a change in how you are going to deliver. In the event that the Client does introduce major changes to the upcoming contract, your incumbency will work against you, if you have not performed well so making a change in your offering will go some way to placating concerns.
Whilst each rebid is a sales opportunity there is much more at stake than just defending your revenue stream as we will point out in the 10 items listed later on in this post. The process should not therefore just be the responsibility of the sales team. As outlined in previous posts the operations team has the clearest picture of what they have been delivering for the life of the contract. If they have taken part in the process as outlined in post No. 2 in this series 6 Steps to Improving Contract Retention, they will have formulated opinions about their strengths weaknesses and what is required from the new contract. Finance, Marketing and Business Development teams will also have useful insight into new solutions in the marketplace that could help win the rebid. This bringing together of cross functional skills to tackle the topic, will reap huge benefits.
You need to make sure that you exploit the Client’s experience of your ability to deliver well. You also need to do your research on how you have performed on the contract. Make sure that you take stock of any feedback that you have received and refer to this in the rebid. Do this even if the feedback is negative, this will demonstrate your acceptance of the current situation and your determination to improve.
Don’t forget to clearly demonstrate your unique value proposition to the Client in the rebid. Do not assume that this is understood or even visible. Remember that some of the individuals involved in adjudicating your rebid may not be familiar with your offering or your history with the Client. Take time to make them aware of what you have provided, the value you have added, and relate this to the future needs of the Client.
The advantage of an intimate knowledge of your Client should mean that you are able to illicit information about their future needs, which should put you well ahead of the pack in terms of the rebid. You need to prepare early and pro-actively introduce changes ahead of the rebid otherwise the Client will simply ask “why did they not do this for me during their contract”. Being well prepared for your rebid will make the most of your advantages as the incumbent provider. It will send signals that you do not take the Client, or their business for granted. Taking stock of what you have already provided will allow you to rectify any issues before they become a problem.
Spending so much time finding out what your Clients’ needs are and revising your service to match, can’t fail to be noticed by the senior decision-makers. Having a keen interest in your Clients’ satisfaction level is bound to have a positive effect on your relationships. As we will see, this will lead to more conversations about what else you can do for the Client. This in turn will provide opportunities for up-selling or cross-selling.
It is hard to believe that in 2016 so many companies still devote huge amounts of resources to chasing new business. As outlined in the first post in the series the 3 Common Causes for Contract Losses, chasing new business is a worthy of pursuit but sometimes this focus on the future comes at the expense of the present. Good things happens to companies that win new Customers but the benefits of contract retention go much deeper.
Here are 10 not so obvious ways you can benefit from being contract retention-centric
1. It’s Cheaper Than Acquisition
In the first post in the series I laid scorn upon the numerous versions of how new Customer acquisition costs X times more then Customer retention. The numbers vary incredibly and may not be entirely accurate but vast swathes of research has been conducted on Customer acquisition versus retention. Every one of them come back with the economics favouring retention as the more commercially viable. The basic principle is still the same, it is much more cost-effective to keep a Client in the fold them to bring in new Customers.
However one must be vigilant. Retention maybe cheaper than acquisition but it isn’t any easier.
2. Loyal Customers Are More Profitable
Not only is loyalty cheaper it produces better returns, according to the developer of the Net Promoter Score Frederick Reicheld in his book the Loyalty Effect Engaged consumers buy 90% more frequently, spend 60% more per transaction and are five times more likely to indicate it is the only brand they would purchase in the future.
In addition to this these Customers on average are delivering 23% more revenue and profitability more than the average Customer. Whilst loyal Customers are more profitable we must be careful not to take their loyalty for granted. Lifetime revenue is the end goal not a quick buck.
One must also consider the flipside that actively disengaged Customers can cost a brand 13% percent of its revenue
All of these factors lead to engaged Customers delivering three times the value to the brand over the course of a year
3. Stand Out From The Crowd
Once you are successful at retaining Clients, long-term brand equity is built. Once you become contract retention-centric you stand out from the crowd even more. You are a supplier that other Customers would prefer to deal with. Clients are running complex businesses themselves and they want to deal with as few brands as possible. The ones that are ever present and continually engaging, are the ones with whom the Customers feel a connection at a deeper level.
In the contract retention game forget about your unique selling proposition, the best brands have a unique contract retention proposition.
4. Earn More With Referrals
Without doubt loyal Customers are the best source of new business. With the advent of online, mobile and social media, digital marketing experts say that the average person is exposed to between 4,000 and 10,000 marketing messages a day. Amidst all this noise it is hardly surprising then that Customers are strongly influenced by referrals from trusted colleagues and friends.
Building excellent Customer relationships will mean that they will have no hesitation in referring your brand to their network. Interestingly Millennial’s are particularly good at spreading the word of brand exploits with 90% sharing their brand preferences online.
5. Engaged Customers Provide Better Feedback
A key factor in contract retention planning is the solicitation of feedback from your Client. Feedback is critical to the success of any business. Feedback is about engagement and Customers who are engaged are willing to give Suppliers the benefit of the doubt. If you engage with your Clients despite negative feedback you’re more likely to be able to win that Customer over. Customers who are engaged are providing signals on how to repeatedly earn their business. Research has shown that Customers who have complained and see their issues resolved are 84% less likely to decrease their spend.
6. Customers Will Explore Your Brand
As an extension to the previous item engaged Customers are six times more likely to be open to exploring your brand and trying a new product or service once that brand has proven itself. This is valuable for up selling and cross selling initiatives.
7. Customers Will Go Out Of Their Way To Do Business With You
Brand loyalty decreases the possibility of a competitor undercutting with a similar service. 68% of women and fifty-three 53% of men are less likely to swap suppliers if they are engaged with your brand.
8. Customers Welcome Your Marketing
Loyal Customers are four times more likely to accept being marketed to and seven times more likely to respond to offers from your brand.
9. Earn Wriggle Room To Try New Things
Customers are crying out for innovation however innovation is both costly and requires experimentation. Loyalty can be fickle and too many changes could chase your Customers away. However once you have established a degree of loyalty your brand will be allowed to expand its boundaries and test new innovations. Crucially Customers will be more understanding if these efforts fail. The bottom line is as long as you maintain the basic Service your Customer will fight your corner for you. Do this and they will stick with you through thick and thin. In fact some of them maybe excited to see what you can do and Millennial’s in particular cite new and exciting products and services as a way to keep them loyal.
10. Employees Stress Less
As we have seen throughout this series, contract retention is premised upon relationship building. Good relationships make life better for everyone. Relationships are mutually beneficial whereas sales are transactional. Doing relational business makes everything easier and Customers are less likely to be critical at the first sign of distress. This protects your revenue and makes life easier on your employees who after all play the biggest role in Customer loyalty.
Go All-In on Contract Retention
In these ten benefits, we’ve covered a gamut of profitable business activities – revenue generation, innovation, marketing, Customer feedback, branding, differentiation, and more. Each one of them is a natural byproduct of focusing on Customer retention.
The cost of contract retention is likely to be less than your new business activities, yet the rate of return should be higher. The overall impact on a business is probably incalculable, considering all the different aspects that are impacted.
Contract retention planning should become a way of doing business, not just something to consider a few months or short weeks before renewal becomes imminent. By proactively considering every contract through each stage of planning, delivery and re-bidding, contract renewal can be a formality.
The most important thing is to not lose sight of your existing Customers in pursuit of new ones. I promise, it’ll pay off.
This was the last in a series of 4 posts
- Part 1 – The 3 Common Causes of Contract Losses
- Part 2 – 6 Steps to Improving Contract Retention
- Part 3 – The 4 Enablers of Contract Retention
- Part 4 – 10 Surprising Benefits of Contract Retention
The weeks Question: Has this 4 part series been useful to you? Please let me have your feedback and let know what else you would like to see on the blog. leave your comments below