Yes, business growth is essential; but it isn’t as matter of fact as simply acquiring new clients. So this year, we’re shifting our focus towards customer retention and how nurturing your current client base can lead to a higher return on investment (ROI) and long-term success.
Here’s why Independent Financial Advisers (IFA) should prioritise growth and how it starts with watering your own garden first.
Why is customer retention important?
Nurturing and retaining customers is about more than just increasing engagement, improving relationships and getting good reviews. The importance of client retention is rife with significant business benefits, all impacting your bottom line. Some of the most important benefits include the following;
- The cost of retaining clients is up to five times lower than acquiring new customers.
- The likelihood of selling to an existing client is up to 60 – 70%.
- Revenue can increase by 25-95% with a simple 5% increase in customer retention.
- A focus on retention can improve customer satisfaction and loyalty.
- Lengthening the client life cycle helps your business gather valuable client and product data to assist additional growth avenues.
How to calculate your customer retention rate
Calculating your customer retention rate (CRR) requires the following critical business information:
• The number of clients at the beginning of a specific period (S).
• The number of clients at the end of the period (E).
• The number of clients you acquired within the specified period (N).
Once you have this information, you can use the following formula to calculate your customer retention rate: CRR = ((E-N)/S) x 100.
For example, let’s say you started the quarter with 100 customers, acquired 20 new customers, and ended the quarter with 110 customers. Then, using the formula above, your customer retention rate would be:
((110-20)/100) x 100 = 90%
This means that you retained 90% of your customers during the quarter. The higher the CRR, the better. Typically, smaller businesses aim for a CRR of at least 20%. However, larger organisations aim for a CRR above 79%. Once you calculate your CRR, you can focus on implementing a few core best practices and strategies to increase its percentage.
Customer retention strategies that work
Focus on your onboarding process
The age-old saying remains that “first impressions count”, and we’re talking about that bottom line in terms of customer retention. The onboarding process can be one of the most significant reasons for client churn, simply because customers need help understanding how they can maximise your service as a long-term customer.
During the onboarding process, be sure to walk the client through the core benefits of the initial onboarding and the overall client lifecycle. In addition, IFAs should pay attention to the significance of consistency and frequent check-ins with regular customers to ensure they’re still aware and can best utilise your services as their needs change over time.
Build customer profiles
Building customer profiles around long-term customers is a strategic way to lean into persons more likely to form a part of your dedicated customer base. This starts by grouping similarities and common buying patterns shared amongst different customer groups. This strategy unifies shared traits and common differences within your client base and could help you gauge what influences the difference between a short-term and a long-term client.
Key areas to take into account when creating customer profiles include age, income, gender and lifestyle and could influence the sales techniques and approach per client group.
Frequently ask for feedback
In many cases, no news isn’t always good news. To increase your customer retention rate, feel free to ask for feedback – even if the response isn’t always be overwhelmingly positive. Frequent feedback can be a massive indicator of what could be responsible for client churn. By dissecting the feedback and seeing how you
can add it to the relevant customer profiles, you can better gauge where to focus your retention efforts.
Don’t overcomplicate the process
Ultimately, customers move away from things they no longer understand. In a competitive marketplace, it’s easy to believe that adding new dimensions to services and products assures industry dominance. Although staying on top of industry trends and adjusting accordingly is essential, overcomplicating core offerings your clients have become accustomed to may do more harm than good.
Be sure to keep your offerings easy to understand and navigate. If transitions are on the horizon for a few loyal customers, be sure to prioritise the shift by keeping it simple and true to the core benefit that made them decide to become a client in the first place.
Start your customer retention strategy with Commspace
The first step towards a successful client retention strategy is knowing what to look for regarding your services, buying patterns and ROI. How does one do that? By managing your commissions and fees beautifully with Commspace. Gather all the data you need to create customer profiles, segment your clients, boost your retention rate and grow your business with the ultimate solution for managing, tracking, splitting and analysing Financial Adviser revenue.