Are you a business owner who finds that you're not getting the growth you expected? Or maybe profitability is down this year and you just don't know why. You're thinking about laying off some people letting go some people well, trying to reduce overhead and cost before you look at all those drastic measures. Take a look at the churn rate of your customers. What does your client retention program look like? Hello, everybody.
My name is Bill Arnold. I'm the president of Prevail Marketing you can find us at www.prevailmarketing.com Every day we try to bring you some ideas, thoughts, strategies, and concepts, to grow your business to better sales and marketing. And today, in fact, for the next five days, we're going to talk about one of the most overlooked areas that businesses just really don't get right. That is client retention, client retention. is a huge problem in the United States and the world. Businesses are losing clients they don't need to lose, costing them lots of money. And today we're going to start the discussion on how to remedy that.
Today we're going to talk about the macro version of the problem we're going to talk about what a cost why you should be concerned about why it's an issue. Tomorrow we're going to talk about which parts of your company are responsible for client retention. I'll give you a little hint about all of them. And for the next few days after that, we're going to talk about every single department from marketing sales operations to customer support C suite sales, I mentioned, to every department, what actionable items they should be doing every single day to ensure client retention.
This is something that concerns you. Stay tuned, and let's get started. So let's talk about how big of a problem this is. So honestly, it's huge. T
here's over 1.6 trillion that's what the T trillion dollars that are lost every year to businesses through client customer churn to huge money I can't get my grasp. What a trillion is even right, let's break it down into some numbers that may make more sense and hit home better. It costs According to Forrester, these are not my numbers. These are where we can verify everything, According to Forrester costs five times more to acquire a new customer than it does to keep an existing one. So you put all that time, effort, talent, revenue, and expense into trying to acquire new clients how much do you really spend, how much effort do you really put in, and how much care do you really take to keep those current clients happy? engaged, involved? Happy? Probably not enough.
It costs 16 times more to bring a new customer up to the same level as existing customers. But the real number that hits home for me, the one that I look at and say wow, I get it. I had understood according to Harvard Business School, and I've seen this study repeated many times. A simple 5% 5% increase in customer retention rates will increase your profitability by 25 to 95% f
Think about that. A mere 5% increase in client retention can mean up to a 95% increase in profitability if that doesn't motivate you to take a look at the seriously I'm sorry, I can't help you. Go do something else. This is not the discussion for you.
Okay, so let's break this down a bit more because I think there's a lot more to talk about. You know, I've been asked many times by many, many clients. What I think a respectable, respectable churn rate is a respectable churn rate. Does there have to be a churn rate? Well, the answer is yes, it does have to be one and there are respectable numbers. Probably not what you're getting. Why does there have to be a churn rate there are always going to be clients who merge with other clients who get bought out, get sold, and close their business. Or maybe there's a new manager, director, or vice president who comes into the business and wants to use their own vendors. So there are always going to be times when it's going to churn if it's b2c. There are always going to be reasons for B2B See, those are easier to understand, I think for most people.
But what is acceptable, what is normal? What is reasonable? Well, what is normal is not reasonable. I'll tell you that and give you a little hint. So if you look at all business, there is a, and I'm talking b2b b2c, there is an average for b2b. Let's talk about it now. Of 75%. client retention rate which means 25% churn is 25%. Sure, and acceptable. By no means, if you're getting 25% churn, you're on your way out of business. I'm sorry. You know, some industries do better professional services than 80% retention, insurance 83% IT services 81%. So some would do better. Okay, some do better, but you get down to things like manufacturing 67% retention, rate. Wow, b2b SaaS, software, 77%, retention rate that's 23%, churn, healthcare. Same thing. 77% retention rate 23% churn. If you're getting 23% churn, again, you're on your way out of business. This is unacceptable.
Clients told me what they should accept and what they shouldn't accept, I would say I tell this applies for b2b and b2c. In the worst case, the worst case scenario through the worst economies through the worst situations, no more than a 10% churn rate should you ever see. Realistically, if you do what we're going to talk about next few days, that churn rate should be down to 5% to 7%. Remember, those increases mean a tremendous increase in profitability. So when you get down just a few percentages, you're changing the stars of your company, changing the profitability, you're changing the growth, you're changing everything.
So let's figure out how to spend more of our time energy and talent, inspiration, and retain the clients we won the hard-earned work we've already accomplished. So let's just go on and talk about why this is so absolutely possible. Why do customers churn which is a reason? Well, everyone has their own unique story, obviously, we understand that, but there are always averages and numbers you're gonna look at and say okay, what happens and the reality is over 70% of the churn is avoidable, simply by better having customer engage your customers better 70%
So if you have a 23% churn 70% of that is easily avoidable. Wow. Isn't it worth your time? Why do they churn according to read 2020 report by CalMinor, they looked at the poor 70% of the churn is because of poor customer service that be able to do they're being driven away. in fact, they didn't they felt they were being driven away from unfair treatment they felt customer support was treated unfairly. Poor customer experience they thought that what they were getting they're put on hold ignored, and had to deal with bots. Oh, don't get me started with bots. We'll talk about that in a second. Well, we'll talk about lack of human service. Bots are fine for quick responses to simple problems. Fine, they get it. But even AI-directed bots are not the answer. They're not sophisticated enough to really handle problem. How many times have been the phone is their thing. For example, airlines. If I'm on a phone call with a with an airline, I'm speaking to their their version of a audio bot. And I find myself yelling at it because it will not understand what I'm saying and I can't go to a representative online chat bots. Oh, I don't know how many. How much time I've wasted trying to get the chatbot to give me something I'm workable and they keep saying do we answer a question? No, you didn't gotta get a representative. No represented be found. Eventually I give up and find someone who's willing to talk to me, that human to human connection is absolutely essential. It will never be replaced by a bot. Bots are not intuitive enough. Bots are not smart enough bots can respond. If I have a simple question about answers great. But once I go through that simple 30 seconds and I'm not getting a response. I want to talk to a person again. If it means losing 70% It means retaining 70% of the people your that are churning. Isn't it worth it? to staff it to have someone who talked to them but most of the problems are almost fruit tarts to too far gone by the time you get to customer support there's lots of things that can be done upstream to avoid a problem even happening to avoid the anguish the pains or concerns the issues. Yes, you're always going to lose most people because of because of pricing or other factors but 70% of your loss is customer service. 70% of the things that are controlled by product quality, or another 30% product features 13% UX UI 8%. So always things that will cause you to lose some clients. But at the end of the day, you need to minimize that. And tomorrow we're going to talk a little bit about who's responsible. I talked about who's upstream responsible who can handle this who's responsible? Well, first I mentioned every everyone's responsible from marketing. They have a major role to play across the board. Sales has a major role to play. Operations has a major role to play. Product Development has a major role to play. Customer Support of course everyone understands they have a role to play with the single business biggest responsibility not just for setting the tone but for actual actionable items that can be done to avoid churn is the C suite. Yes, the ivory tower, the people the top. They have a role to play as well. So again, tomorrow we'll talk about each department and the role they should play. And then the couple days after that, three days after that in fact, we're gonna talk about each different departments and give you actionable items, things that we do for our clients work. I've taken clients down from a 30% churn rate down to a 4% churn rate by implementing what we're going to talk about over the next few days, you know, what they did to their profitability? You know, what did that to their growth, you know, what did that did to their revenue? You know, how investors started looking at them differently, because all of a sudden, they had greater profitability, they weren't losing clients. That's where you want to be if you stick with us over the next few days, we're gonna get there. We'll talk to you about it. We'll share all the secrets. If you found this video to be helpful, please like subscribe, please follow please do whatever is appropriate on the channel you're watching because we spread this across the internet. If you have a particular problem, you can either go look at the blogs, we've already started posting about this topic. Or better yet, contact us. I love having conversations. I love talking to people I love training people have explained to people how to find solutions to their problems whether you hire me or not. That's that's I don't see the material. But that's not what this is about. We'd be glad to have discussion to give you ideas things you can implement yourself in order to stop the flow of loss that you're experiencing through churn. So until tomorrow I want to thank you for your time as always, please have a great night. See you tomorrow.
Learn How to Avoid Client Churn
The following is an unedited transcript of a video posted on 11/27/2023 the original may be found Here