Should I stay or should I go?

How to keep your customers after X-mas

(and many years to come)

By Cas Weijenberg & Wim Nieuwenhuijse

Retaining customers is core business

In these weeks counting down to X-mas, customer volume is at it most volatile. It is the time when consumers are contemplating their subscriptions and services for next year, customers are rethinking their vendor strategy or finetuning their annual budgets. “Should I stay or should I go?” seems to be a growing part of the December mindset. As a consequence, retaining efforts reach peak levels during the festive months. But with competition luring those clients who are susceptible to churn, that effort is mostly too late.


Focus on Customer Lifetime Value is a must

Retaining customers is far less costly than attracting new ones. Nothing new there. On average, it costs 5-25 times less to retain a customer than acquiring a new one. At the same time, a 5% increase in customer retention leads to roughly a 25% increase in profits. Loyal customers will buy more with a premium, saving them the hassle to switch. And it costs you as an organization less to serve a longstanding customer as operating services come down over time. The real winners are those companies that maximize the customer lifetime value (CLV) of their treasured clients.


Digital acquisition comes at a price

Enter the era of online buying. As the digital shopping cart has its clear advantages, costs of acquisition (CAC) can also go through the roof. It is estimated that CAC in digital eco-systems have increased by 50% over a five-year period.

But there are five more caveats in turning to new digital customers if your old ones are leaving you.

  1. The new GDPR regulations make it harder to funnel prospects into your customer base.
  2. It requires quite some investment to stay on top of Google’s continuous changing algorithms and be found.
  3. The ecosystems of FaceBook, LinkedIn & Twitter require their own content. Irrelevant whether it is paid advertising or own content. That means extra costs.
  4. In the increasing information overload mistrust is created on an ever-increasing scale. Messages you want to put across will be diluted and less effective. More investment in peer-to-peer referrals is needed.
  5. You need to stick to a fast service response. 90% of digital customers expect a direct answer to their question. Industry standards are high and they expect you to adhere to those. A few percentage points lower, and you lose a lot of prospects.


The Slow Erosion of the Tail

Despite those increasing CAC, we still see at Morph many clients who are satisfied with ‘only’ five percent churn. A well-known figure for Telco, Energy, Banking and Insurance industries. They have even finetuned their budgets to it, investing heavily to overcome churn with new -bargain oriented- customers. What a lot of them do not realize, that with every churn, they also give away their total addressable market. Customers hardly come back. We call it at Morph “the Slow Erosion of the Tail”. Neglecting your current customers slowly eats away your base. At the same time, you could have prevented that erosion with shifting budgets based on maximizing CLV. A subtle festive tip from our side: don’t wait with retention to this month. Start with it with every fresh acquisition. And stick to it when your customers grow along your company’s growth.

Want to know more about customer retention, CAC and CLV? Contact us!