The strategy should be to retain them and any new client acquisition should concentrate on clients that match this profile.
Also, and perhaps more importantly, once you are clear about the frequency and potential value of any future engagement with your clients, you will have a better handle on how to allocate your sales and marketing spend.
CLV analysis should be the foundation of your client retention program. This is because, part of the process of identifying future value is of course an analysis of what will be the potential lifetime of the client.
You need to map out what their journey of life will be, and when and how will they need your advice, empathy and proposition. You can then calculate the potential value they will add and decide how important that client is to you and your business.
In the old world of the Hunter sales model, one-off sales were fine, but isn’t it more attractive to your business for good clients to provide you with repeat business on an on-going basis?
The obvious way to achieve this is to have an attractive proposition with a fair price and deliver excellent customer service.
We will see more and more business models moving away from hunting for new clients as on-going service provides a more profitable business paradigm.
I’d ask you all, how many of you know the current and future monetary value of each of your clients and how many of you use this metric to influence the profitability and success of your marketing, acquisition and retention strategies?
Customer retention- the new marketing
What retention policy does your business have in place to safeguard your long-term relationship with the clients that provide your business with most value and profit? Do you have one? Have you ever thought about having one?
Every profitable client in your business who leaves or ceases to trade with you deprives you of a profitability stream that might otherwise have continued for many years.
In plain business speak, losing clients hurts the bottom line. Replacing a lost client requires additional investments in time, marketing and even acquisition discounts to your normal service proposition.
As many business have found in our sector these acquisition expenses may well offset revenues from existing client engagement for a year or more. If the cost of acquiring clients to your business are high in terms of time and resource then retention is even more important.
Talk is cheap, but figures count and a famous study on retention from the famous business analysts Frederick Reichheld and W Earl Strasser Jr highlighted the financial importance of retention.
They reviewed companies in nine diverse sectors and found that a 5 per cent reduction in the loss of clients boosted profits by up to 85 per cent.
