Management teams of emerging companies frequently make the frequent mistake of investing too much time focusing on customer acquisition and too little time on retention. Scaling a business and getting it off the ground by building customer traction should be one of the principal focuses of an early stage company. However, if you do a weak job of engaging your customer, building loyalty and producing repeat business, you run the risk of being on a constant treadmill as it relates to building your revenue, for you will by no means benefit from positive word of mouth (and ultimately chance failure).
Two weeks ago I experienced firsthand a perfect illustration of a young business making this serious mistake. I got an email containing a pretty persuasive offer to eat at a new local restaurant for a greatly discounted price from one of the common group buying sites. After considering the economics of this new deal, the restaurant was probably barely breaking even or possibly experiencing a slight loss from the deal (it was clear with their marketing strategy they were making a substantial investment in customer acquisition). Intrigued by the offer (and also interested to see if this new place had anything to fulfill my foodie lifestyle) I made the purchase and was ready to chow down. Kudos to this brand new restaurant…their go to market strategy proved successful in acquiring a new customer and potential repeat “diner” to help build their following…
Friday night comes, my belly is prepared and let’s just say this new company absolutely fumbled the ball. Not to go into great detail, but none of the staff except management was aware of the deal …so customer service clearly failed. I waited thirty minutes past my scheduled reservation; I experienced very bad wait service and had an overall “unpleasurable” night (although the food was half decent).
The business did a great job spending enormous effort on acquiring a customer who eventually would turn out to be a negative word of mouth source based solely on a shortage of focus on retention (not a very good move).
What is the lesson to be had? It’s not just about customer acquisition. Focus on your customers as though they were your very best customers and do everything in your power to retain them and ensure their happiness. The net effect will not only spell out repeat business, but also positive word of mouth and an increase in your net promoter score. If a person takes the leap of giving you their business, don’t fumble the ball!
Kobie Fuller is a Senior Associate at OpenView responsible for the identification and qualification of investment opportunities in addition to helping manage the outbound program.
