Managing customer acquisition and attrition is a fine-balancing act for most organizations, while for others it’s a horrifying feat. With sales and business development at the top of almost every company’s agenda, it is surprising how many companies have little, if any, internal intelligence on client attrition.
Managing client attrition and acquisition in order to achieve sales growth requires more than just knowing which customers have left the organization, it also requires understanding why and where they go. This understanding is important and required in order to target replacement customers at a lower cost of acquisition and/or at the same or higher margin. However, let’s not forget that at this stage there is merely a replacement of a lost client, meaning that from the start the sales organization is spending more at a decreased profit margin (client attrition erodes profitably even if clients are replaced at a one to one or better ratio since it is always less expensive to maintain a current customer than to acquire a new one).
Nevertheless, without this understanding most sales organizations are akin to a hamster on a wheel. When obtaining new clients at the same or less rate as the number of customers that are lost, a causal effect is produced—a less efficient and more expensive sales process. Conversely, sales organizations that have slower client acquisition and lower attrition may find it difficult to grow, unless of course they are able to further penetrate their current customers, thus increasing revenue at higher profit margins than that of the acquisition of a new customer.
So what’s the punch line… today we are seeing glimmers of an economic recovery, and thus client organizations are becoming better positioned to seek out competitor services and or products, notwithstanding that the competition for the same customer is higher than ever. Therefore, we are faced with the art and science of calculating a formula that allows a sales organization to manage and/or prevent client attrition while at the same time increasing new customer acquisition. As mundane as this post may feel, just know that most companies have little to no control of this practice and thus find themselves living the ups and downs of a turbulent revenue stream.
Does your organization have a method to address this issue? If so I would be interested in hearing about it.
