The Image GroupThe Image Group

By Adam Norman

Most business experts agree that selling to existing customers is far easier – and considerably less expensive – than cultivating new prospects. Indeed, one estimate suggests that 80 percent of a company’s future business will come from a mere 20 percent of its current customer base. With statistics such as that, it makes sense for organizations to target retention as a growth tactic.

But, it turns out, that’s rarely the case. Research shows that 44 percent of companies admit to having a greater focus on acquiring new customers than they do on fostering retention, with another 40 percent devoting equal emphasis to acquisition and retention. That means less than one in 5 companies are concentrating sales strategies on retaining their existing relationships.

To fully appreciate retention’s benefits, consider a marketing metric that experts call Customer Lifetime Value. CLV is a way to forecast the total financial value a client will provide a company over an extended period. Connecticut business owner and CLV proponent Chris Zane explains the concept this way:

“We recognize that multiple transactions over a period of 20, 30, or 40 years are going to generate tremendous revenue and great opportunity for profit. Whenever someone walks through our door, we don’t see [that person] as a $1.69 energy bar customer, or a $6 tube customer, or a $25 pump customer. Instead, they’re a $5,600 profit opportunity.”

Of course, the key to any retention growth strategy is – you guessed it – retention. Vital to retention, according to Zane, is engaging customers “in such a way that the next time they think about the products we offer, they have a positive feeling and they want to come back to us.”

And engagement involves more than just customers. Companies “have to engage the people who work there,” says Zane, “by empowering them to do what’s right for the customer.”

Next time you’re interacting with a client, resolve to consider that relationship’s long-term worth. When you’re mindful of each customer’s lifetime value, retention and growth should be easy.
Why Customer Retention Matters