A Customer retained is a Customer Gained

Customer retention is taken a little too nonchalantly by many businesses these days.

Ben Franklin’s saying “a penny saved is a penny earned” applies in this case.

Every customer you retain is a customer you don’t need to replace. It may sound trivial but the rate that you lose customers controls the rate that you are growing.

For the sake of making the maths easy, say you lose 100 customers a year in your business. That means you need to go and find 100 customers to replace your lost customers with.

Painful eh? Now if you want to grow at all, that means you need to get customers in excess of your 100 if you want to grow. Say you want to grow by 100 customers this year that means you actually need to find 200 customers in order to reach your growth goals.

That is twice as much work as you thought.

Obviously, in light of that, it makes sense to prevent as many of your customers from leaving as you possibly can.

I can’t do the math for you but I can encourage you to look at your own business’s customer defection rates and calculate what an increase in your retention rates is worth to your business in hard dollar terms.

Often times the amount will surprise you.

One client we worked with figured out that increasing their retention rate by 1% of their customer base was worth about $15,000 over the next 12 months. That spurred them into action to make sure that they made an effort to keep their existing customers happy.

I know from a friend in the insurance industry that 1% increase in your retention rate could be worth as much as $100,000 in revenue.

Customer retention is as valuable as customer acquisition. After all, every customer you keep is one you don’t need to go out and get again.

You can go further and say retention is more valuable than acquisition because the longer you can keep a customer, the more they are worth to you, the more they are worth to you the more you can spend in order to get them in the first place.

Ben Franklin’s advice on thrift should be applied to customers. Make sure that you “Get greedy and make sure you don’t part with them cheaply.”