Numbers can tell you a lot about how well your business is doing. Did you know there is a number that can help you evaluate the quality of your customer service? The customer retention index is a measure of how many of your customers are returning to do repeat business with you. A high retention rate indicates that your customers have discovered great value in the service you provide and continue to return and buy from you. A low retention rate says your customers have made the decision to take their business elsewhere.
Organizations that track this rate understand a few things their competitors may not. The statistics compiled by Invesp paint a pretty clear picture:
- The likelihood of selling to an existing customer is 60–70%, while the likelihood of selling to a new customer is 5–20%
- Raising your customer retention rate by 5% increases profits by 25-95%
- It costs five to seven times more to acquire a customer than to maintain a customer
While acquiring new customers is important, it’s pretty clear that taking care of current customers plays an important part in the long-term success of any business. In fact, strong customer retention can help improve your new customer acquisition. Satisfied customers are happy to refer their friends and relatives to you.
Increasing customer retention involves more than meeting customer expectations. It means exceeding them to some degree. As the new year begins, take a good hard look at what you can do to delight customers and keep them coming back over the next twelve months, and for many years to come.
By George Maginnis