Edition 22

Improving Customer Retention during a Slowdown

26th April 2010 By Daniel Alcorn no comments

Daniel Alcorn looks at 5 statistics you should consider before creating your next marketing strategy.

When revenues decline, business owners are forced to reduce expenses.  However, the challenge is to make sure that your cost cutting doesn’t undermine customer retention. During a tough economy, it’s as important as ever to focus on improving customer satisfaction and retention.  Consider these statistics:

1.     The cost of acquiring a new customer can be five to eight times more than retaining and generating the same revenue from satisfying current customers (Alan E. Webber, “B2B Customer Experience Priorities In An Economic Downturn: Key Customer Usability Initiatives In A Soft Economy,” Forrester Research, February 19, 2022)

2.     A 2 percent increase in customer retention has the same effect on profits as cutting costs by 10 percent

3.     The average company loses 10 percent of its customers each year.  Improving that customer retention by 2 percent has the same effect as cutting costs by 10 percent.

4.     For some industries, the profitability of each customer tends to increase over the life of a retained customer (2002 Emmett C. Murphy and Mark A. Murphy, Leading on the Edge of Chaos, Prentice Hall 2002)

5. Once your customers have switched to a competitor, it is difficult and expensive to win them back. However, some proactive steps can be taken to protect your business income and enhance long-term loyalty (and profitability)  More research statistics:

  • 62 percent of customer defections can be modified if discovered in advance (Michael Lowenstein, “Model modelers in predictive churn,” SearchCRM, June 2002)
  • 68 percent of customer defections occur because customers perceive “an attitude of indifference.” (1000ventures.com. Data source: American Society for Quality)

If customers mostly switch to competitors because of vendor behavior (as opposed to product or price), you have the opportunity to reduce defection before your customer chooses to transfer her business and long-term loyalty to a competitor.

Strengthening your relationship and improving your results

How can you gain an advantage in customer satisfaction and retention? Obtaining-and maintaining-this customer-relationship depends on several actions: making a commitment to maintaining a current database of your customers, reaching out and expressing sincere appreciation to your customers at least 3 or 4 times each year, providing a feedback loop by which your customers can suggest useful information that will help you improve your service.


During economic downturns, many consumers reduce discretionary purchases and focus instead on essential spending and basic products and services.  Envision this: While your business promotes for its share of the consumer’s “smaller wallet,” your competitor has already implemented an Appreciation Marketing program.  The customer has heard from your competitor, perhaps more than once thanking him for the loyalty and feeling special; as if he belonged to an exclusive customer group.  The customer is about to purchase that product or service again.  Now envision this:  It’s your company that has been in touch with the customer, and not your competitor.   Which business would you rather be?

About the author: Daniel Alcorn

Daniel Alcorn has a 30 year background in commercial banking and marketing, having served as Senior Vice President of New England based Chittenden Bank.

As the Strategic Business Owner, Alcorn created ShowAppreciation.Net to help his business clients improve their marketing effectiveness.

The company is based in New York state, midway between the large Montreal and New York City market base.

The Customer Appreciation and Retention Marketing Program helps business owners realize increased sales from exisiting customers.

Clients have the flexibility to manage the program in-house or have ShowAppreciation take care of the day to day routines.

Contact telephone in US (518) 346-2115  

Skype: DGAlcorn   

Email: DGAlcorn@aol.com

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