The idea of customer retention is not a new one.  For decades now, customer-oriented companies have spent plenty of time, energy and money figuring out ways in which they can keep their customers longer so that they might continue to collect on their growing business and profits.  But why?  Beyond the obvious reasons for wanting to keep customers (continuous flow of revenue, ability to increase services, etc.), a major reason for customer retention efforts boils down to creating a loyal customer.  Here’s why:

They weren’t lying about how expensive attracting new customers can be compared to retaining current ones.

Everyone has heard some statistic saying something to the effect of: “It’s (input your favorite multiple here) times more expensive to find, onboard and keep a new customer than it is to retain one that you already have.”  While many people believe this when they hear it, some may roll their eyes at the seemingly made up number.  Well don’t.  There have been numerous quantitative studies (pg. 85) proving that “It can be (up to) ten times more expensive to win a customer than to retain a customer.”  Even more interesting is that “The cost of bringing a new customer to the same level of profitability as the lost one is up to 16 times more (expensive).”  Suddenly customer retention just became a bigger priority, no?  Well if it hasn’t yet, it soon will…

Small increases in customer retention can lead to large increases in profit.

It’s hard not to talk about customer retention efforts without bringing up the famous statistic from the Harvard Business Review that a 5% increase in customer retention rates can lead to a 25-95% increase in profits.  Those are some strong figures.  Strong enough, in fact, to have been computed and published over 20 years ago and still be powerful enough to be quoted to this day.  The fact is, the extra effort exerted through customer retention can lead to more loyal customers and more loyal customers lead to both a lower amount of defectors and a higher amount of sales.  But as these figures show, profits can only be realized if some sort of retention plan is put into place, so where do those come from and how are they implemented?

Customer retention and loyalty come from being able to read the signs.

While creating an entire retention plan is much more complex and all encompassing, a major part of customer retention is the detection of indicators or warnings that a customer may defect or switch services.  It has been said that up to 82% of consumers will leave a brand or discontinue services with a company that provides them with one poor customer service experience.  By noticing key indicators such as customer complaints and an increased amount of time spent with your contact center, businesses can form retention plans that may be put into place after these occurrences to ensure that these dissatisfied customers are helped and their business preserved.

By understanding why retention plays a key role in increased profitability and what key indicators lead to lost customers, you too can better understand and prepare your retention plans so that your business begins to foster customer loyalty and collect the dividends associated with customer retention.  It all starts with a well calibrated, customer-focused contact center… Is yours ready for the necessary changes?

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