The Agitator is rather passionate on the subject of donor retention. [Just ‘Search’ that term on our website!]

So we were gratified to see this article — Keep ’em Comin’ Back — from the Center for Media Research discussing an Acxiom/Loyalty 360 study of customer retention in the commercial space.

If it’s any consolation, businesses struggle with customer retention too!

Citing Bain Consulting, the article reports that the average company loses 20-40% of its customers every year. Reducing customer attrition by a mere 5% can improve a business’s bottom line profits by 25-85%. Increasing retention by 1% is equivalent to reducing costs by 10%.

The article also cites a Northwestern University study which found that 12-15% of a business’s most loyal customers contribute 55-70% of the company’s total sales. Another validation of the Pareto principle.

Here are some other highlights of the study, which queried marketers’ perceptions and plans:

  • 84% of respondents use customer retention marketing strategies;
  • 49% believe their strategies are working;
    [In other words, half are flying blind!]
  • Only half (49%) agree with this statement: “I know who my most loyal customers are, and I know the best way to reach out to them and get them to engage with my brand”;
    [How many Agitator readers would agree with that statement?!]
  • 57% will increase retention marketing spend over the next two years;
  • Rewards programs (65%), social media (65%), and 1:1 marketing strategies (64%) are most often used for customer retention;
    [Apparently rewards programs are fading fast, with social media and CRM on the ascendancy.]
  • RFM (recency, frequency, monetary value) and customer lifetime value are used most often to measure customer retention, with 64% and 51% respectively;
  • 40% of companies access data individually through different lines of business, while just 35% report their data is centrally located with universal access.

Unfortunately, just as with nonprofits, recognizing the situation doesn’t necessarily motivate businesses to address the problem. As the article says: “…although marketers know they need to focus better on customer retention, they aren’t doing it.”

The finding that stood out for me: 60% spend less than 20% of their marketing budget on retention. In fact, 40% devote less than 10% of their marketing dollars to customer retention. DUH!

The article concludes: “Harvesting data and gleaning it for true customer intelligence is the secret for driving the effectiveness of your customer retention strategies. As the top 20% of your customers drive 80% of sales, learning how best to understand and engage top tier customers is today’s most important competitive advantage.”



P.S. You should download the full study here (free, but registration required).



This article was posted in: Donor retention / loyalty / commitment, Fundraising analytics / data, Nonprofit management, Research.
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