Mungo Dunnett Associates: Management and Marketing Consultancy

Customer Retention

Background

One of the themes of the last 5 years has been retention of customers: the ability to keep your most profitable customers. And yet – most companies still focus on new sales, in the belief that whilst new customers are coming in the front door, that will more than compensate for losses at the back door.

In industry after industry, we are finding that this traditional sales focus is coming under pressure. There are two reasons: first, it is an extremely expensive business to be continually seeking new customers – it costs marketing money, and requires a big sales force. Secondly, in almost every market the ‘good’ customers – the ones that really make companies money – are already spoken for. This means that new customers, broadly, are less profitable than the customers that tend to leave. And when little or no effort is put into stopping these customers leaving, the effect on the company’s profitability can be extreme: only a small % of your best customers, leaving, will take a substantial chunk off the bottom line.

Our experience is drawn from financial services, where much of the best practice in customer retention is occurring. But we have used the following approach successfully in nine other industry sectors in the last year.