GartnerG2 answers debate over customer retention verses customer acquisition; monitoring the pulse of consumers
Posted Aug 12, 2002
Quick, what's the top priority driving your CRM investment? If you're a financial services firm, chances are you want to acquire new customers -- but GartnerG2 says your focus should be on customer retention.
In Q1 this year, GartnerG2 surveyed 117 U.S. retail marketing departments in the financial services industry (banking, investment, insurance and credit cards) and found that customer acquisition was their number one goal, followed by cross-selling. Customer retention lagged far behind. And GartnerG2 analysts were quick to point out that this was a major mistake.
Here's why: Many financial-services providers have a high churn rate, rendering cross-selling ineffective. Also, acquiring new clients costs nearly five times more than retaining existing ones, GartnerG2 claims. "If you are losing high-value customers, the costs go up substantially to acquire a new customer and grow that relationship to the same level," said Kim Collins, research director at GartnerG2, in a statement.
The key to keeping customer happy is identifying and closing the response-time window to warning signs. For instance, banks should use CRM systems to monitor the pulse of customers, such as cancellations of direct deposits or increases in the use of foreign ATM transactions. Both of these acts can indicate a customer on the brink of churn or "signal a change in the financial status that put the provider at risk," Collins said. "Careful assessment will determine what is a retention opportunity versus a risky relationship."