Churn is commonly defined as the rate at which a business loses its customers within a certain time period. For a company to grow, it’s rate of retention, meaning the number of customers you keep must exceed the number of customers you lose.
It is a direct reflection of the constant tension that exists between retention and acquisition marketing.
How you see all of this is generally a matter of whether you see those dollars you spent as an investment or as an expense.
Many consider those dollars an expense rather than an investment. I’m not one of them. In fact, I think it is one of the best investments you can make, because you get to control where and how that time, energy, effort and cash goes.
Advertising and marketing dollars, spent wisely, generally result in higher traffic: more clicks, more calls, more people showing up at your door. Coupled with great client care, you have a relatively dependable recipe for growth. Fail to invest sufficiently in either infrastructure and your business is likely to stall, atrophy and die.
This is not an exercise in theory. This is reality and there couldn’t be a more graphic example than the one I just fought my way through!
It started with the retirement of my insurance agent, who had earned every piece of our insurance business over the years! I told him I didn’t ever want to find myself over-insured, but never wanted to find myself un-insured or under-insured either, and he listened.
He spent hours analyzing our needs and explaining our options, and he did that every time a policy came up for renewal. He wasn’t the best salesman, but he was without question the best agent. In fact, it finally reached the point where I never questioned his choices because I knew his recommendations presented the best value.
I knew it because it was obvious he was at least as focused on retention as he was on acquisition. And, I repaid his investment in our relationship by becoming a loyal and lifetime client.
After he retired, I found myself searching for someone to replace him. That’s where the lessons I learned about customer care and retention translated into something invaluable.
I was part of a network marketing group when I found out I was soon to be without an insurance agent. And, it was from within that group that I found the insurance professional I thought would be the best choice for us. She was young, aggressive and seemingly involved in just about every group and organization in our community: Rotary, Lion’s Club, the YMCA, Young Professionals, chamber of commerce, the network marketing group I mentioned and countless others, I’m sure.
She was building a book of business, creating the foundation of her practice. She was investing the lion’s share of her energy and effort into acquisition! So, what’s the problem?
The problem is becoming blind to the very fine balance that must exist between acquisition and retention. The problem is investing all your energy and effort into finding new customers, while all but ignoring your existing clients. The problem is allowing your existing customers to feel invisible.
Because, when that happens, they leave! They leave, just like I just left.
She spent all, or most, of her time prospecting for new clients, while her existing policy holders were left wondering where she was and what she was doing.
By constantly searching for new clients, she risked losing clients she’d already found. She created a constant, never-ending churn. And, the worst part is, I’m quite certain she has no idea what she’s doing.
I was with someone in the same industry with the same hunger for new business last night. Their profiles were eerily similar with one exception. She recognized the danger in focusing all of her resources in pursuit of new business at the expense of taking care of her existing client base. So, she hired someone to assist her.
So, the obvious question is: What are you doing to make new clients?
More than that: What are you doing to keep the ones you’ve got? Are you keeping track of the numbers? How many new customers you make? How many of your existing clients you get to keep?
It costs a lot to bring someone to your door, to have them click on the right button on your site, to reach for the phone or to drive in. It costs a fraction to keep them clicking, calling or coming back.
Managed successfully, this is a great investment that can deliver a substantial return. Managed poorly, or not managed at all, and it’s an expense with little or no hope for anything worthwhile resulting from your effort or your energy.