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Customer loyalty is essential to any organization seeking to maintain existing revenue or trying to create revenue growth. Holding onto existing customers can dramatically reduce the amount of time, effort and money required to grow the organization. 

 

Customer retention rates can be low – or as high as 100%. Lower customer retention/renewal rates are problematic because they are expensive and inefficient to counteract, requiring a very high investment in sales and marketing programs to drive new customer acquisition.  Higher customer retention rates can dramatically lower these costs and can enable a company’s growth to far outpace its rivals at much lower cost.  Winning new customers while losing a significant share of existing customers is like filling a bathtub with the drain open.

 

The examples below show the stark differences between a 74% customer retention rate and a 90% customer retention rate. 

 

At a 74% customer retention rate, a $30 million business will lose $7.8 million in revenue year-over-year and will need to sell almost $17 million in new business to reach $40 million in sales.

 

 

At a 90% customer retention rate, a business will reduce its year-over-year revenue loss to $3 million and will only need to sell an additional $12 million to reach $40 million in sales. 

 

 

 

As these illustrations show, loyal customers can make a dramatic difference in an organization’s overall financial health and dramatically reduce the cost of growth, even in a challenging economy. 

 

Compound your retention rate over the years and you have a dramatic impact on your corporation’s profits.

 

All of this makes it more important than ever to implement CEM (Customer Experience Management) best practices that drive customer loyalty.