Numerous studies proved that it is approx. 5-7 times more costly to acquire new clients, but still majority of companies are in the continuous quest of attracting newbies. Only 18% of the more “innovative” ones understand the value of Client Retention, integrating it into their business development strategies. Unfortunately, focus on Client Retention is not sufficient. There are three common problems companies having Client Retention on their radars can still face, resulting in significant potential revenue being lost, slowing down their overall potential growth.
What are the three key problems to avoid, preventing your business from potential revenue loss?
PROBLEM #1: FOCUS ON HIGH RETENTION %
The unfortunate common trend is to focus on achieving a certain (high) retention percentage rather than focusing on full client value maximization. The “We need to keep them” or “We need to make them stay” is still dominating the client retention discussions and once the 90%+ number is achieved, client retention is ticked as “successful” and celebrated. Delivering maximum value to the clients, is the key to success: if it means letting clients go (in case you see you can’t provide them with the results they desire) or growing them (by spotting growth opportunities to maximize the value created for them).
PROBLEM #2: POOR VALIDATION OF CLIENT’s SITUATION
Further, companies frequently don’t validate the current situation of their existing clients, assuming it’s “old same”. They then take the fastest track towards keeping them by extending the existing contract, selling them exactly the same as last time. Many simply copy paste what was done for their clients before (last week / month / year) without getting the full picture of what has changed for the client, what are their current pain-points and what do they desire to achieve now.
PROBLEM #3: NOT SHARING WHAT YOU HAVE IN STORE
Moreover, they forget to communicate what is their full portfolio of products / services to their clients and all the value the business can deliver to them, being beyond the current product / service they are contracting or buying. The usual danger is of being “boxed” as specific-provider only, not even being considered for alternative and related products / services, supporting their decision to keep the “as last time” contract in place, and purchase the extra products / services desired elsewhere.
Of course you can praise yourself for job-well-done in case your client retention numbers are reaching 90%+, but what if the buying power, willingness to purchase and expansion potential of your current clients would be 100% or 200% higher than now? Are the 90% still relevant? Are they still an indication of success?
Let’s look at a very basic example to illustrate the point:
Daniela had 10 clients in 2017 and she retained 9 in 2018, giving her a 90% retention rate. Well done! Or, …not just yet! When analyzing the 9 clients she retained she realized she is earning 10k per client per year (simply continuing the same contracts as in 2017 with them), but she discovered that all 9 clients would be willing to expand the current projects contracted and/or recommend her within their company/network. She identified the total willingness to buy of each client would actually be double in 2018, being 20k. Therefore Daniela is facing an opportunity cost or…a lost potential revenue of 90k. Is this a job well done? Not really!
YOUR TURN!
Do you currently truly maximize the value from your current clients or do you focus only on high retention numbers? Do you have a strategy in place to validate their current situation and also effectively communicate what you have in store for them in order to spot all possible client engagement growth opportunities?
