In the semi-final of the 2011 U.S. Open, Roger Federer had Novak Djokovic on the ropes. With two match points, Federer looked to seal the deal with a wicked serve: The neon ball looked unreturnable as it shot off Fed’s racket. Then, in a moment that can only be described as miraculous, Djokovic slapped the ball right back for a win.. The crowd erupted in awe, and Djokovic would go on to win the match.
In general, people tend to focus on the dramatic.. But often it’s the “boring” things that most deserve our attention. Djokovic could hit that shot because he had spent countless hours on the unglamorous work that’s the foundation of greatness.
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In business, the same principle applies. While it’s understandable to think explosive growth is the product of wild experimentation, it’s often the fundamentals that get us there. Retention, for instance, might not be the first word that comes to mind when you think about growing your business, but it might be the most important.
This post explores why retention is so essential to growth, and how you can incorporate it into your growth strategy.
Why retention is essential to growth
The most successful businesses retain at least two-thirds of existing customers. In fact, retention is now a priority for 97% of companies. Why? Well, a big reason is the economics of revenue generation. On average, it is seven times more expensive to capture new business than it is to maintain existing clients. And the longer you maintain existing clients, the higher your customer lifetime value (CLV).
In short, it’s simply less risky and more profitable to develop a deeper relationship with the customers you already have than to try and win new ones.
A healthy retention rate provides a strong foundation that frees a business to accept risk. You can target that new customer segment, develop a new product, or test your new messaging. You have the money and the stability to experiment.
Finally, a business that maintains its existing client base is not only creating reliable revenue and room for trial and error, it’s also cultivating goodwill among its customers. If your customers are happy and feel cared for by your company, then it’s only a matter of time before they spread the word. And few things are more potent growth drivers than positive word of mouth.
Even if it doesn’t directly lead to any revenue, you’ve created fertile ground for future expansion efforts.
How to incorporate retention in your growth strategy
The first step to incorporating retention into your growth strategy is communicating to the necessary stakeholders that it is part of your growth strategy. Not everyone sees operations like customer support as essential to the expansion of the business. Because of this, it’s vital that your team has the right mindset regarding retention. Make it clear that growth and acquisition aren’t synonyms. The latter is one path to growth, but much of the gains your company will see start with the clients you already have.
Secondly, prioritize account expansion appropriately. Many companies put undue emphasis on acquiring new business instead of deepening their relationships with existing clients, and the incentive structure for sales and marketing teams can reflect that imbalance. If you see your current clientele as a critical growth driver, then make sure to compensate your team accordingly.
Lastly, if you’re investing seriously in your relationship with your clients, then actively look to leverage that goodwill. A spontaneous good word from a loyal customer is incredible, but incentivizing that evangelism will yield returns. So consider putting together a referral marketing program that encourages customers to spread the word for a reward or limited-time offer. It may take a little tinkering, but the payoff will be worth it.