Importance of Customer Retention

July 31st, 2015
Steven Howard

Many organizations place a great deal of emphasis on attracting and gaining new customers.

While this is important, I feel it is more important to place an even higher emphasis on retaining and keeping your current customers. This is particularly true in saturated markets and industries, where your customers have many, many alternatives available to them.

Numerous research studies have shown that if you can reduce your attrition rate….that is the annualized rate of lost customers….by as little as five percentage points, you can increase your bottom-line profits by anywhere from 25% to 85%.

That’s right, just keeping more of the customers you have, and preventing them from taking their business elsewhere, can have an immediate, positive impact on your bottom line profits.

The two best ways to keep customers from leaving are:

  1. understanding their needs, and
  2. delivering upon the promises you make to satisfy these needs.

What is the worst thing that happens when a customer leaves?  It is not just that you lose the revenue, and profits, from that customer this year. It is also that you are likely to lose all future income from that customer, at least for several years to come. Lost customers rarely return. And certainly not quickly.

But the worst thing may not be just the lost revenue impact on your sales figures. The worst thing is that a typical customer will tell up to 19 people when they are dissatisfied with your products or services. Thus, your ability to transact, or to develop relationships, with these 19 other prospects and customers can be quickly diminished.

Another thing to remember is that not all customers are of equal value. Typically, a customer who has been with you for a longer time is more valuable than a more recently acquired customer. Research shows, for instance, that a customer who has been with you for five years is likely to be giving you 8-10 times the profit stream of a newly acquired customer.

Hence, if you lose a customer that has been buying from you for five years, you may need to replace that customer with not one, but perhaps 8-10 new customers just to replace the value of this one lost customer.

If there is one message you want to give your staff today, it may be a renewed emphasis on keeping and satisfying the customers you have.

Keeping good customers is a more sure-fire method for future success than a constant focus on attracting new customers.


Key Point: lost customers rarely return, and certainly not quickly. Thus the lost revenue stream from a lost customer is usually for several years, or forever.

Taking Action: what is your customer attrition level?  How has this changed in the past 2-3 years?  If you do not know, who should be assigned to study this issue?

What savings could you enjoy if you reduced your customer attrition levels and reduced your need for finding new customers?

Which do your employees think is more important: keeping current customers or finding new customers?  Why?  Is this the best emphasis given your current and anticipated market conditions?


This article is excerpted from the book Powerful Marketing Memos, which will be released in Kindle and paperback formats in early August.


Leave a Reply


Copyright © 2011 Howard Marketing Services · All Rights Reserved ·
Website maintained by Bramhall Web Designs , UK