If you’ve been reading along this week, it must seem as if I’m obsessing with data. While my inner nerd is peeking through a bit, that’s not my real obsession. The data I’ve been writing about is only one aspect of what is a primary business obsession of mine: customer retention. It ought to be one of yours too.
Simply put, the only two things that should be a primary focus of your business thinking are making great products (or services) and providing great service to customers. Why? Because those are the two keys to customer retention and customer retention is the key to a successful business.
There is lots of research on the value of keeping a customer versus acquiring a new one. According to research by Market Metrics, your success rate selling something to an existing customer is around 65 percent. The probability of converting a new prospect, on the other hand, is only 5 percent to 20 percent. If you’ve been servicing those customers well and providing great products, that’s a very believable finding since the folks that know you, love you. They spend more too: research says about a third more.
So why aren’t you spending more time thinking about customer retention and about how to cut down the churn rate? Probably because the data points you’re reporting as KPI’s are emphasizing customer base growth. There is a place in the dataset for acquisition information and an important one at that. But, for example. when Google reports that 25% of new app users leave after the first day they install an app, obviously new users can only take you so far. Are you looking at retention rates by acquisition channel? Didn’t think so.
Data is a tool, not a crutch. The business is about growing and retaining customers. There are lots of ways to do that but at the core of every one of them are a great product and even better service. Is that what you can honestly say you have?