Retention and Relationships

One of the really smart people in the customer retention space is a guy named Luc Bondar at Carlson Marketing. He did a presentation a couple of years ago that quoted academic work from 2001 on the value of customer retention. It is on slide 7 in this presentation, and essentially states that a 10% improvement in customer retention leads to a 30% improvement in overall customer value. This is contrasted with a 10% improvement in acquisition cost (which adds about 1% in customer value) and a 10% improvement in margin (which adds about 11% in customer value).

Now this is very apples-to-oranges, since the investment needed to achieve these 3 different 10% improvements vary widely. But the basic point that translates a 1% retention improvement to a 3% customer value improvement is the important one. Generally if your company has not put much effort into customer retention, you can see big improvements without a large investment. So do the math – what would a 3% improvement in customer value do for your company’s bottom line? And compare that with the cost to deliver the first 1% improvement in retention. Chances are that ROI looks pretty impressive.

This entry was posted on Friday, October 17th, 2008 at 3:28 pm and is filed under Loyalty Marketing, Marketing Analysis, Marketing Strategy, Relationship Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.