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Empathy: The Only Key to Customer Retention

Every customer we interact with has unique pain points, challenges and concerns. The key is to communicate with them on a level they will respond to. That level is called empathy, i.e., when we put ourselves in our customer’s shoes and feel what they are feeling.

Adopting an empathetic approach in dealing with customers pays off in multiple ways. Studies have found that higher empathy leads to increased customer retention, satisfaction, and financial growth.

Customer Retention Is the New Growth Strategy

Statistics show that a 5% increase in customer retention can increase a company’s profitability by 75%. This proves that if you treat existing customers well, you will consistently reap the benefits.

Attracting new customers may be rewarding, but it also often involves a lot of hard work and expense. On the other hand, the costs associated with repeat business are significantly lower.

In a study commissioned by Harvard, 70% of companies said that it’s cheaper to retain a customer than acquire one, while others have suggested that the cost of acquiring a new customer can be as much as 7 times more expensive.

Also, the probability of converting an existing customer is 60–70%, whereas the likelihood of converting a new prospect is only 5-10%. So it pays to retain a customer and empathy helps you do just that.

Empathy Drives Retention

When there is a problem, it is important to see it as a “person to be helped”  
instead of  an “issue to be solved”.

One of the benefits of empathy in dealing with customers is that you can anticipate their needs and serve them better. When you understand customers, it is easier to solve the issues and make them feel heard. Additionally, you can use empathy to enable customers to see your point of view, which would encourage reciprocal empathy. As a result, empathy can help you co-create and implement a better solution.

The best-quoted examples of leaders who applied customer empathy to drive strategy include Akio Morita of Sony and Steve Jobs from Apple. They never commissioned market research to know more about the market or customers. Instead of spending money researching customers, the founders simply talked to them. They would just walk around the world watching what people did and put themselves in the shoes of their customers.

How To Get Started

Dealing with a customer’s emotions and problems with empathy is easier said than done. To build an empathetic approach, you need to break your customer’s problems and feelings down into four key areas. The areas are:

What does my customer think and feel?

“The software takes too long to load…”

What does my customer hear?

“My colleague says….”

What does my customer see?

“I have seen another product that has features like…”

What does my customer say and do?

“I want a product that’s reliable…”

When you figure out what your customers feel, hear, think and say, it’s much easier to build an everlasting relation with them.

Here are three scenarios that can help you understand how empathy can help you come to a mutually beneficial solution. The following lens has been used to create distinction:

  • Perceived problem: What seemed obvious and was assumed.
  • The real problem: Uncovered using empathy.
Scenario #1: A hospitality customer had subscribed to a company's service, but wasn't able to use it  due to the pandemic lockdown. The customer wanted to unsubscribe to the service.  

What did the company perceive the problem to be: The customer was unsubscribing because the product wasn’t needed anymore as the business had been impacted by the lockdown. There had been negligible adoption and usage of the product.

After empathizing with the customer, what the real problem was: The customer had to sustain their business and wanted to cut costs, manage cash flows, and expenditure. It had nothing to do with the product or its usage.

If we look at the real problem, one of the solutions could be to work around a flexible payment term that suits the customer. In this way, the customer will be able to manage its expenses and the company would succeed in retaining the customer! All this, and a good CSAT. Clearly, a win-win situation.

Scenario #2:   An eCommerce customer was sending multiple and nasty escalations as the support tickets were taking longer resolution time 

What did the company perceive the problem to be: The customer was hyper and a pain in the neck! Support tickets take time to resolve and the pressure was not helping.

After empathizing with the customer, what the real problem was: The eCommerce customer had seen an increase in demand as a result of the pandemic lockdown. And they were losing business as they were not able to service their customers because of the product issues. Besides business, they were also losing their brand value as they were facing flack on social media.

The customer’s anger is genuine, and the product company needs to take accountability and own the customer’s problem as theirs. They need to work with the management and prioritize the support ticket and proactively update the customer on the progress. They also need to start their conversations with positive statements such as “Okay, let’s fix this problem for you…” or “Right, we can sort this issue by doing…” to gain confidence and show that the customer representatives are taking the ownership of the issue. In fact, if they commit a resolution date/time and resolve it before that, the result will be a delighted customer.

Scenario #3: The product implementation for a telecom customer took more billable hours than estimated and the customer was thinking of shifting to a competitor's service
  • What did the company perceive the problem to be: The customer was planning to move to competition because they were getting the service at a cheaper rate. The customer was ready to compromise on the quality as they didn’t want to spend more money.
  • After empathizing with the customer, what the real problem was: The customer was feeling cheated as the billable hour estimation was not done right and now they had to pay more than what was planned. They were losing trust and considering moving to another vendor who could deliver on time and within budget.

If we look at the real problem. this needs a deep and authentic analysis of how the billable hour estimation went wrong. If it was a miscalculation or inadequate discovery at the vendor’s side, then without any doubt and delay, they need to accept the mistake and absorb the extra cost. If there was lack of proper brief from the customer, they need to go back to the customer and have an empathetic conversation with full data. The conversation should focus not on the blame game but on a solution road map which is mutually beneficial.

It’s crucial to know how customers think, perceive, and feel towards products and services to keep them around. Sure, you can use surveys, discounts, and loyalty schemes to encourage them to stick around. But using empathy in your conversations and product decisions is a deeper approach to understanding your customers and creating lifelong fans.

Connecting with them empathetically can create a better understanding between you and your customers than other customer-centric approaches.

Everyone wants to be heard, and your customers are no different!

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