What is Your Customer Retention Rate?

In this episode of the Make More Work Less podcast, Jackie Zach and Mike McKay discuss the crucial topic of customer retention. They emphasize the importance of knowing your customer retention rate, highlighting that it’s often more cost-effective to retain existing customers than to acquire new ones. Jackie explains that many businesses mistakenly think customers leave due to price, but the real issue is often perceived indifference—customers feel that the business doesn’t care about them. To combat this, they recommend regularly staying in touch with customers, hosting events, and showing value beyond just a transactional relationship.

They add that understanding the customer lifecycle and measuring key performance indicators, such as the frequency of customer purchases and the amount spent per transaction, is vital for tracking retention. Both hosts stress the importance of receiving regular feedback from customers to identify issues early and improve retention strategies. They also note that recognizing the right customers to target from the beginning is crucial to long-term success. By aligning the value provided with the price paid, businesses can maintain customer loyalty and maximize the lifetime value of each customer.

Having trouble with customer retention? Take advantage of a complimentary business strategy session to discover the opportunities in your business! http://makemoreworkless.actioncoach.com/mmwl-diag-and-questions/

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Podcast Transcript:

Jackie Zach: Welcome back to the Make More Work Less podcast, where we continue our series on the 10 essential business questions for business owners. These questions come from an article by Barry Moltz from the Shafran Moltz Group, which was shared with me by AmEx. I thought they’d be great to discuss with our listeners. We’ve already covered topics like the problem your business solves and how you generate income, but today we’re focusing on customer retention. So, the next question is, what is your customer retention rate? Mike, why is this important?

Mike McKay: Great question, Jackie. Customer retention matters for a few reasons. Mathematically, it’s cheaper to keep a customer than to acquire a new one. In marketing, our goal is to increase lifetime value and reduce acquisition costs. Retention directly impacts both. Plus, when customers stay with you, it signals that you’re providing value that meets or exceeds what you promised. If people feel they’re getting good value, they’ll stick around.

Jackie: It’s interesting because many people assume customers leave because of price, but the biggest reason is often perceived indifference—they feel you don’t care. Two-thirds of people leave for this reason, so one key question is: how are you showing your customers that you care?

Mike: That can be as simple as staying in touch at least every 90 days, or hosting customer events that bring everyone together. There are structured ways to stay connected with your best customers, like the book The Referral of a Lifetime, which gives a method for keeping in front of your A-list customers. Another good resource is Retention Point, which helps identify the critical times in the customer journey when people are most likely to leave. The bottom line is that you need to show your customers that they matter. If the value you provide doesn’t match what they’re paying, they won’t stick around. It’s not about low prices, it’s about ensuring the value you provide is always at least slightly above what they’re paying.

Jackie: Absolutely, and once you get your messaging right and tap into what your customers care about, things get a lot easier. One way to track retention is by measuring key performance indicators (KPIs) like how many customers you’re losing each year. How many stay for more than three or five years? How often do they buy from you—once every 10 years or monthly? And how much do they spend each time?

Mike: Exactly. It’s all about the number of transactions and the average dollar sale. Those are key metrics in tracking retention.

Jackie: Yes, and I believe we’ve discussed those in our Five Ways episodes as well. The key is tracking your numbers. I’ve said it before: math has no emotion.

Mike: That’s right, marketing has no emotions. It’s either working or it’s not. But when you consider customer retention, it’s also about understanding the lifecycle of your relationship with each client. For example, sometimes we accidentally enroll coaching clients who aren’t the right fit. If someone expects us to do all the work for them, that’s a mismatch, and we may lose them after a few months. Retention can sometimes be about recognizing who the right customers are from the start—those who are a good fit for your services and who will stick with you long-term.

Jackie: That’s a good point. Also, when was the last time you asked your customers for feedback? Have you checked in with them on how you’re doing? You could even have an outside party, like a surveyor, reach out to get honest feedback about how well you’re serving them.

Mike: For clients in our coaching programs, our team can help gather that feedback. We also have a strategic alliance marketing person who surveys both our clients and their clients to see how things are going. Getting feedback is especially important if you’re experiencing high churn rates. In the subscription business, losing 24% of your members a year is considered normal. But that’s a costly issue, as it can increase your acquisition costs significantly. Retention is critical from the moment a customer engages with you. By providing more value than they’re paying for over time, you can maximize the lifetime value of that relationship.

Jackie: Exactly. It’s all about knowing your numbers and getting feedback. Two simple but not always easy things to do. If you need help with this, click the link below to sign up for a strategy session, and we’ll discuss it further. Until next time, go kick some ass!