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Is your customer retention strategy working?
Keeping in touch with your customers is always going to be one of the most important roles of any business, but… do you know what your customer retention rate is?
Before you begin a customer retention strategy, you need to know what your customer retention rate is – this will then provide you with a benchmark for improvement and will help you to understand if your retention strategy is working.
Here’s the magic formula:
((# Customer at end of period – # Customers acquired during period) / # customers at start of period) x 100
For example, if you start the year with 20 customers, gain 5 new customers in the first quarter, and have one customer churn. ((24-5)/20)) x 100 = 95% retention
Once you know what your rate is, you should try to look at similarities between those who have churned, to determine if there is a reason why they are no longer using your services, or if there is a specific customer type that is leaving. You may find that a certain age group are more likely to stop using your services. This will then give you your first focus area to improve and develop.
So why is customer retention so important?
Not only does it measure how successful you are at acquiring new customers, it also tells you how successful you are at satisfying existing customer needs too.
Retaining customers is easier and more cost-effective than acquiring new ones. Returning customers spend more and buy more often, and refer friends and family. A 5% increase in customer retention can increase customer revenue by 25-95%!
Here’s why customer retention is critical for your business:
- Affordability – it’s 5-25% more expensive to acquire a new customer than it is to retain an existing one
- ROI – A 5% increase in customer retention can increase company revenue by 25-95%
- Loyalty – Retained customers buy more often and spend more than new customers (they already understand the value of a product or service)
- Referrals – satisfied, loyal customers are more likely to sing your praises and their friends and family – bringing in new customers free of charge!
The average customer retention rate for companies in financial services is 25% – does yours beat this? If not, why not?
Customer Retention doesn’t have to be hard work, and doesn’t have to be all about ‘sales’. Keeping in touch with your customers on a regular basis can be enough to retain them. Visit our Customer Retention KIT for some key tips and ideas and free tools to help you.
Product maturities – one of the easiest ways to retain a customer!
If your business is mostly focussing on mortgages, do you have a process in place to ensure you are contacting your customers whose products are due to mature (before the lender does!)? As a TMA member, you can access Eligible’s Customer Retention Platform which manages your customer maturities for you, and will help to increase your retention rate. Combine this with an impactful communication strategy and you will be onto a winner…
Want to know more about how we can help you retain your customers? Speak to your Key Account Manager using our KAM Map.