How your clients are disappearing before your eyes!
One of the most talked about topics we come across is client retention. Agencies put so much effort into obtaining a new client and yet keeping them over the years is even harder. In fact, for some it’s absolute mystery.
Because of the effort involved with tracking, even getting accurate retention figures is too challenging for some. Often it gets pushed to the “we need it, but just can’t get to it” category. What you are really saying is “we need our clients, but we just don’t want them to be a priority.” Ouch.
Harsh? Yes, however, it should be because it is what your customers are experiencing. When you don’t give them a call to let them know their rate is increasing, they feel the effect of your lack of focus. You’ll end up feeling their loss when they find a new agency.
And the attention goes to…
There isn’t a mystery as to where the focus goes – the spotlight is shining on new business production. The thrill of the hunt is exciting and engaging! Targets are reached, bonuses are paid, and everyone is happy. Everyone, except the existing customers who aren’t in the spotlight anymore because they’ve been left behind.
Worse yet, the former clients who left your agency have become completely invisible. They’ve vanished but their loss lingers. More than lingers, their vanishing act erodes the agency. It’s a plague to growth, productivity and even culture.
What happens when you are looking the other way?
Team members have to work harder year after year to overcome the losses. Management struggles to make realistic plans and agency-wide targets are missed. The whole show is running like a hamster on a wheel without ever knowing why.
This disappearing trick of attrition has long-term effects. Consider a 20% annual retention loss. For every 100 new clients, 20 are gone after the first year. Now lose another 20% of them in year two and so on. After 5 years, you will only have 33 left. 33 out of the original 100!
Losing 20% of an existing customer base every year means your agency has to make up that loss first before it can grow. Consider that again. To achieve a 5% growth rate, you would actually have to have a total increase of 25%.
25%!!! That is why it feels like growth gets harder and harder every year.
A little goes a long way
Without change, the infrastructure of an agency weakens from the stress. Plans for organic growth must consider both new business acquisition and client retention. The agency needs to improve and it doesn’t take a magic trick to make it happen.
The first step is getting the agency’s team to own the process. Their buy-in is an absolute necessity and they must feel connected to results of keeping clients.
AGENCY CFO TIP: One great way is engage the team is to create a monthly scorecard that shows which clients have left. Include the client name, policies, value and who their assigned agent was – and keep it public for the team to track their own “relationships.” You want them to feel the connection back to the clients they worked so hard to on-board. Plus, it will help show you trends and maintain a more balanced focus on new and existing business.
Improved retention is possible and there are agencies that achieve a 90%, or greater, retention rate. Applying a 10% increase in customer retention to our example means going from 80% to 90%. This yields a difference after five years of 52% of your clients rather than 33%. Compound with year after year of new business and your agency is on a true growth trajectory!
Now do you see why both sides need your focus?
There is an inequality existing at a lot of agencies. New business is praised while existing clients are taken for granted. An equal emphasis needs to be put on valuing existing clients as much as new ones. They helped you reach your growth targets in the past, so they are absolutely crucial to maintaining them in the future.
If you would like more information on calculating client retention, please reach out to Don at [email protected] and ask for your free Client Retention Best Practices Guide!