Is 95% customer retention a good result?

I recently met with a prospect who told me that they retained over 95% of their customers. I was impressed because so many companies are focussed on attracting new customers they don't apply much energy to retaining existing customers and growing customer lifetime value.

I was even more impressed when I compared the results with some of Britain's best brands like AA & RAC who have highly developed customer retention programmes and typically get around 85% retention across the year.

On further probing, the 95% retention figure was per month not per year. If the 95% retention figure per month is recalculated across the year then the annual retention figure is 40% not 95%. This meant they have to get 600 new clients each year just to stand still!

This is a well run company offering a really good service. If this is typical example, no wonder so many companies are so obsessed with attracting new clients. But do they have an attraction problem. In this example, the figures imply that retention is an issue and the proposal I am preparing focuses on this by including a customer lifetime value strategy.

Smart customer lifetime value strategies used to be something only a handful of Britain's best brands did. However, changes in technology and data capture mean that it is something that should be considered by all companies large or small.

Web marketing tips that any business (large or small) could apply to attract and keep valuable customers and grow customer lifetime value.

• Calculate your annual retention figure (aim for 80% or better)
• Consider the relationship between volume and value for your customers e.g. calculate the retention figures for high value, mid value & low value customers - it's more important to keep high value customers
• If it is low, investigate why and develop action plans to improve retention and keep more high value customers
• I develop a customer lifetime value matrix with with specific actions for customers in specific cells. This can be linked to a smart email system that automatically send outs personalised, dynamic messages for each customer focused on improving Customer Lifetime Value.  

For more information, take a look at my article on increasing customer lifetime value.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.