Golden Goldfish Excerpt – Retention vs Acquisition


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The following is an excerpt from the upcoming book, What’s Your Golden Goldfish? (available on Amazon May 1st):

Chapter 2


“The search for meaningful differentiation

is central to the marketing effort. If marketing is

about anything, it is about achieving customer

getting distinction by differentiating

what you do and how you do it.

All else is derivative of that and only that.”

- Theodore Levitt, Harvard Business School

Question: Do you focus on the funnel or fix the leaky bucket?

retention versus acquisition

Answer: Focus on the Leaky Bucket

Retention is Fast Becoming the New Acquisition

Satisfaction drives loyalty.  More importantly, it drives retention.  The key to a healthy bottom line is the ability to keep your best customers and employees.

According to the recent book Outside In by Harley Manning and Kerry Bodine, {Endnote 13} retaining customers drives revenue in three critical ways:

  1. Incremental sales from current customers.
  2. Retained sales as a result of lower churn.
  3. New sales driven by word of mouth (referrals).

Can small improvements in retention make a big difference?  Absolutely. According to Gartner Group, {Endnote 14} “A mere 5% improvement in retention can increase profitability by upwards of 25% to 125%.”

The Revolving Door Effect 

Too much focus in business is on acquisition.  The vast majority of spending is focused on getting prospects through the door and converting them to customers.  Little attention is paid to their retention.  For most companies this door represents a revolving door.

Let’s use the insurance category to illustrate the point.  The average insurance company maintains a retention rate of 80%.  USAA, a leader in customer experience, retains customers at a rate of 97% {Endnote 15}. Christine Moorman, the T. Austin Finch Professor of Business Administration at the Fuqua School of Business at Duke University, demonstrates how this plays out over a three-year time frame.

The results are eye opening.


Companies with 80% retention will have to replace over 50% of their customers every three years.  Comparatively USAA only needs to replace less than 9% of its customer base over a similar three-year period. 

Retention of the Vital Few

Based on the Pareto’s Law, {Endnote 16} for the vast majority of companies, 80% of profitability is driven by 20 percent of customers.  These customers are your key accounts. Retaining these customers should be your top priority.

Let’s start exploring how companies utilize the concept of the Golden Goldfish to retain these vital few. Little extras that drive loyalty and referrals.

Republished with author's permission from original post.

Stan Phelps
Stan Phelps is the Chief Measurement Officer at 9 INCH marketing. 9 INCH helps organizations develop custom solutions around both customer and employee experience. Stan believes the 'longest and hardest nine inches' in marketing is the distance between the brain and the heart of your customer. He is the author of Purple Goldfish, Green Goldfish and Golden Goldfish.


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