The Four Keys of Client Retention – Your Growth Depends on Reducing Your Attrition Rate
Submitted by: Jay Kassing, President MARQUIS
In marketing we tend to spend most of our time finding new and creative ways of acquiring new clients and cross-selling existing relationships. And while that is very important, precious little effort is spent on reducing client churn. Why? It may simply be because you don’t know where or how to begin. And then of course, there is that “too much other stuff to do” thing.
There are four keys to successfully reducing your attrition. Hopefully, these steps will make it easy for you to see what must be done with a retention program to impact your financial institution’s growth in a big way.
Before we discuss how to help you focus on your retention efforts, it would be worthwhile to confirm the depth and breadth of the “profit risk” associated with attrition. While many studies have been performed by us and others, the one most noted is the Celent Communications study from a few years back. It stated that the average financial institution loses 14.6% of their clients each year. Keep in mind, this percentage is an average. We have certainly seen some institutions’ attrition rate north of 20%. Let’s put this into context. In order for your bank or credit union to grow even one dollar, your sales must first replace all of the clients (and profit) you lose. That represents a great deal of effort and production, just to get back to even. Then of course, you want to grow on top of that, right?
What if you lost 20% of your profit through client attrition this year? Might there be cuts in the marketing budget? You would then really need to be creative in acquiring new clients. The need for growth would be solely measured by how many new clients came aboard or how much you scored with cross-selling. While there will always be a need for new client growth and cross-selling, getting a handle on your attrition problem changes the metric of what marketing can do to drive profit growth. You can add to your personal worth and bring corporate-wide value in making marketing the central figure in managing retention. That would be important.
