Customer Retention: a Tough Needle to Move?
February 13th, 2009 by Doug BrightKevin Hillstrom has an excellent post today entitled Customer Retention: The Myth where he says improving customer retention might sound like a good idea but is actually quite difficult to do. I agree with his assertion that retention rate, average order value, and orders per buyer are difficult to improve in the short term, but I, perhaps unlike Kevin, I think that there can be real immediate gains to be had by trying.
Kevin mentions that improving average orders per buyer by 0.2 orders per year is an “amazing accomplishment.” While that’s true, it’s also true that an improvement as small as 0.2 can have a significant effect on the bottom line in absolute dollar terms. Orders per buyer per year is one of those high leverage metrics where small improvments can yield big increases in profit. Especially for companies where that number is hovering around 1.
If you want to see for yourself, be warned that translating improvement in customer retetnion to real dollars can be a bit of a pain if your SQL is a bit rusty or you don’t have a great BI system in place. If that describes your situation, feel free to use our customer scorecard to do the calculations. You may find that an increase of 0.2 is all it takes to get you to the next level.
Tags: Customer Retention, Marketing Metrics, purchasing behavior, scorecard
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