Altify’s 2017 Business Performance Benchmark Study found these to be B2B CEOs’ most important strategic focus:
87.3% – Customer Retention
86.5% – Revenue Growth
73.1% – Profit Growth
65.2% – Operational Efficiency
64.6% – Increased Market Share
38.0% – Cost Reduction
Customer Retention edged out all the others for the #1 most important strategic focus.
- Acquiring a new customer is 5-7x as expensive as retaining an existing customer.
- The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.
- Increasing customer retention rates by 5% can increase profits by 25-95%.
If all this sounds important, we need to remember that:
- 89% of businesses report their customers state that their user experience is the key factor in their loyalty.
The user experience is essentially customer service, how we serve and provide value to the customer (continually).
Well, what is the user experience that will drive customers away (to churn)?
Strategic Insights’ 2019 survey found that the overwhelming majority of the reason customers leave is within the control and influence of the sales rep:
14% – Customer is dissatisfied with your service
68% – Customer believes you don’t care about them or their business (you only care about yourself)
Add that up and 91% of the reason customers will leave is within the control and influence of the Funding Pro!
So to retain customers, the customer must feel satisfied with your service and believe you care about them (you are aligned with their interests and business goals).
Okay, fair enough. Well, what’s the first step in improving retention?
Let’s start with getting clear with what it really means.
Definition of Customer Retention:
Customer retention is the ability to retain customers over a set period of time. It is represented by a percentage that measures how many customers a company keeps at the end of a set period of time, and that number impacted by the number of new customers acquired as well as the number of customers who churn (leave).
To consistently improve it, we have to first start measuring it.
Here is the Retention Rate Formula:
Customer Retention Rate = ((# Customers at End of Period – # Customers Acquired During Period) / # Customers at Start of Period) X 100
Okay, to break this down:
Set Time Period: 1 Year
# Customers at Start of Period: You start the year with 100 accounts (customers) that you had gotten funded (before the year).
# Customers Acquired During Period: Funded 100 deals.
# Customers at End of Period: 140 accounts (customers)
Plug these in and it looks like this.
( (140 – 100) / 100) ) x 100 = 40% Retention Rate
For reference, Mixpanel’s 2017 Product Benchmarks report found these two key industry retention rates:
25% – Finance
35% – SaaS
The average of all other industries was under 20%.
What does a renewal really mean to you?