A bird in the hand…

There is an old proverb: A bird in the hand is worth two in the bush…and it would appear that this is especially true when it comes to keeping your own customers happy and engaged.

The ones you have are worth more to you than the ones you are yet to catch.

Some general business experience from the professional services sector highlights this.

Most professional services businesses apparently lose about 50% of their customers over a 5 year period – hence the need to continually find new ones.

If you were able to reduce the rate of defection by 5% p.a though, there would be a huge impact on your bottom line.  It is estimated that you would go close to doubling your profitability if you increased your client retention rate in this way.  Basically the impact of increasing your customer retention rate by 2% is about the same as the financial impact of cutting costs by 10% – and that saving drops straight to the bottom line.

Some time ago I read an article (and cannot remember the source sorry) which stated that the return on equity for customer driven companies with high service and retention rates was 17% p.a average YOY, whereas the market average across all companies was a return on equity of about 11%.

There were other interesting lessons from the customer-driven companies, with profit levels approximately double the industry average; market share increasing at nearly 3 times the rate of industry average; and; average cost per customer substantially lower.

That’s a massive difference in return, and value of the business overall simply by being conscious of the value of the existing customers and ensuring that a high service and high retention attitude is adopted.

Great customer service pays off.  Is it worth reviewing your service strategy and retention rates?

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