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Client Retention’s Role In Long-Term Growth

Alex Osborne, the G&A’s director of Client Services, explains why Professional Employer Organizations should make client retention a top priority in an article special to PEO Insider.

We have all heard the statement that it is easier and more cost effective to retain existing customers than it is to market, find, and sell to new customers. No matter how you slice and dice this statement, the same concept applies to the PEO world and its existing and potential customer base.

Acquiring new customers is rarely an inexpensive venture. The cost associated with marketing, advertising, and selling to new customers can become enormously burdensome, and the buck does not stop there. Given the methods of obtaining new customers and the economies of scale associated with targeting and marketing to a new customer base, often the most expensive part of the process begins when new customers sign on the dotted line. The proper implementation and onboarding phase for new clients requires time, talent, resources, and energy, and can quickly become more costly than the marketing and sales process. Due to the high costs associated with onboarding a new client, the PEO often will not realize a profit during the first year of the relationship. For this reason, the name of the game is retention.

Retaining customers year over year allows the PEO to reimburse itself for the costly effort of onboarding, turn a profit, and strengthen its bottom line. A focused operational strategy and practices and client satisfaction metrics are vital to retention.

Focused Client Service Strategy
Each PEO has its own unique strategy and business practices that make up the core value of its organization. Some focus their attention on cutting-edge technology, while others promote industry- leading expertise in human resources, benefits, risk management, or various other areas. Whatever the niche practice may be, each organization needs to ensure that one particular operational strategy is found at the core of its business: ensuring that the PEO promotes an environment that is focused on customer service and is adaptable to the needs and wants of each individual client.

A customer service focus should be a core value in every business in operation today. Without customers, there would be no business, and without exceptional customer service, there would be little to no repeat business. Southwest Airlines has a great tagline as the header to its website’s customer service page. The tagline reads: “We like to think of ourselves as a Customer Service company that happens to fly airplanes (on schedule, with personality and perks along the way). How may we help you today?” Say what you want about the airline industry itself, but this group understands the importance of delivering quality customer service and broadcasts this focus boldly in black and white. Wouldn’t it be great if each PEO had a similar customer service tagline: “We like to think of ourselves as a customer service company that happens to manage your back office (with accuracy, friendliness, and expertise along the way). How may we help you grow your business today?” You can imagine the customer retention that would be achieved with this level of customer focus at the forefront of the operation.

A PEO can adamantly promote a customer service focus to each of its clients, but without positive actions to back up the hype, the message will fall by the wayside. To avoid this, a PEO should adopt a team strategy approach with one goal in mind—to maintain happy clients. This goal can be achieved through delivering services promptly, positively, accurately, and with the ability to adapt. The team should work together, hand-in-hand with clients, to create attainable goals that meet clients’ needs for the vision of their organizations now and in the future.

Designating a client advocate, on the PEO side, is crucial to the success of the team concept. The client advocate should be the voice of the team in communicating well and often with clients to discover any needs, complaints, or other areas of pain that may be experienced. The advocate and team work to quickly identify unhappy clients and adapt strategies and processes to meet and exceed client expectations. The team concept, headed by a client advocate dedicated to sterling customer service and adaptability, will quickly set an organization apart from its competitors.

Client Satisfaction Metrics
For the client advocate and team to identify both happy and unhappy clients, various metrics need to be implemented to gauge individual client satisfaction. While each organization may have unique metrics to benchmark such satisfaction, the following five metrics should be included in the process:

  • Response time: Response time has the ability to pacify or intensify client issues. Responding quickly does not necessarily mean you have the answer, but it does let clients know you are working on the issue and will get back to them with a resolution in a timely manner.
  • Resolution time: Once the response time has been established, it is now critical that it be followed by a prompt and appropriate resolution. A quick resolution demonstrates to clients the PEO’s commitment to providing preeminent customer service.
  • Expectation versus perception: This metric speaks volumes about how the PEO was expected to perform versus how the client actually perceived the services rendered. While client expectations are formed early in the sales and implementation process, it is imperative that the PEO sales and operation teams speak fluently about the services promised compared to the ability to deliver on said services. At all costs, avoid the death sentence of over-promising and under-delivering.
  • Likelihood to refer: A client’s likelihood to refer business to you is a superb metric to gauge its happiness level with the services provided. Clients are typically unwilling to refer business and hang their reputations on the line for services they feel are unsatisfactory.
  • Overall satisfaction: Asking clients to express their candid feelings about the overall services received grants the PEO an outsider’s view into the roots of its core service offerings. This information allows the PEO to sustain areas of excellence and invigorate areas of weakness.

Acquiring new clients is a costly endeavor. Focusing your operational strategies and practices on a customer-centric, adaptable team approach, along with measurable client satisfaction metrics, allows a PEO to substantiate its future growth on a foundation of happy, lifelong clients. In the words of Gary Vaynerchuk, an industry leader in social marketing: “The acquisition of consumers might be on the verge of being mapped. The battlefield is going to be retention and lifetime value.” Winning this battle is pivotal to the future success and bottom line of each PEO.

This article appeared in the November 2014 issue of PEO Insider, a publication of the National Association of Professional Employer Organizations (NAPEO). To view the original article, click here.

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