Customer Retention - the battleground for Sales Success in 2017?

Customer Retention is a major focus for Sales Organisations currently. Within our own Sales Institute of Ireland community, 67% of our members have told us that the majority of 2017 sales growth will come from existing customers. There's been lots of research done on the cost of acquiring new customers versus the cost of retaining existing ones. Depending on which study you read, and the sector you’re in, the thrust of some of the main findings are as follows: 

1. An increase in retention rates by 5% can increase profitability by between 25% - 95%.

2. The cost of acquiring a new customer is at least five times more expensive 
    than the cost of retaining an existing one

Ref: www.salesinstitute.ie\events

So, the case for holding onto existing solid customers makes financial sense, but how does your sales organisation benchmark against best practice trends and practices in relation to customer retention?  In this blog, we will explore three areas that will give an indication whether you are on the right track ...... and the best place to start is to look at some cold hard numbers to get an idea of what good looks like.

So, what is a ''good retention rate"?  According to Xactly Corporation (Global Sales Compensation Plan Experts), speaking at a Sales Institute event on the 14th of June 2017, -

"A best in class retention rate is 93% - 95% mark and above.  A poor business 
?retention rate is a number that is moving towards the 80% mark.  A sales 
?organisation with a decent customer engagement plan, and a compensation 
?plan that drives the right behaviours should be performing close to 
?90% retention"

How do you benchmark?

 The second area to look at is Customer Retention Metrics and KPIs. In a 2016 Sales Practices Research Survey, here at The Sales Institute of Ireland, we asked sales leaders how many KPIs had for (a) New business acquisition, and (b) Customer retention / churn. Every participating Sales Leader had at least 2 KPIs / Metrics or more for new business acquisition.  Only 20% of them had a KPI to do with churn or retention.  

Assuming you have metrics and KPIs' in place for retention - the next thing to evaluate is if they are fit for purpose. Some of the questions worth exploring are;

• Are the retention metrics delivered in format that will give you 'early warning alerts' before potential loss of business becomes imminent or are they a measure at the end of a quarter or half year?
• Is the data produced by the measure useful? What do you use it for?  
• Can the data be analysed by customer size and segment? 
• Do the measures drive increased engagement with customers? 
• Do they drive continuous improvement conversations within the sales organisation? 
•  Do they drive the correct set of behaviours from your account managers?
• Do they help you analyse and plan for the future?

Finally, are you utilising the latest tools and trends in customer retention management? We have an event on this topic in two weeks time, but in the meantime here are some of the key trends in customer retention that a trending in this space currently;   

•  Separation of Retention activities from Renewals team: The retention team has a focus on engagement and customer success management. The renewals team are only on point to do the deal.
• The Rise of Customer Modeling Journeys: Sales Organisation's are now mapping out a customer journey plan with a set of practices and milestones to be achieved.  Customer engagement is a journey in this model, as opposed to the sales team just focusing on the next up sell opportunity at a service review meeting.
• Digital now paving the way for more self service options - to offer customers more control over getting the answers they need in real time.
• Social media starting to become more central to engagement strategies. *Whilst there is always reputational risk associated opening out customer conversations to social media, current research suggests that when companies engage and respond to customer service requests over social media, those customers end up spending 20% to 40% more with the company.” (- Bain & Co)

In conclusion, churn is a reality of B2B sales life and some of it can't be stopped. However, if it gets out of hand it can effect a lot more damage than just to sales numbers and profitability. It can impact culture, staff motivation and a myriad of other organisational success factors. Making sure your customer retention practices and measures are fit for purpose is a key starting point to reducing customer churn.

Authors: Syl Cotter / David Malone

The Sales Institute is hosting an event entitled: "New Trends in Customer Retention on - 28th of June, 2017"