By: Joost Meijlink
What is your retention rate? Few commercial leaders know the answer. They do not really measure it, or they measure it incorrectly. They look at revenue instead of customers, at averages instead of trends, or they base the answer on gut feeling.
Even when they do measure it, the question is whether they interpret it correctly. “We are around 85%.” They mean it as good news. We are horrified.
The calculation no one makes
With annual retention of 85%, you lose 15% of your customers every year. That sounds manageable. Project it over four years and you have lost almost half.
Four years. Half your customer base. Gone.
Raise retention to 95%, and it takes about thirteen years to lose half. At 99% retention, it takes seventy years. The difference between 85% and 95% is not a nuance. It is the difference between surviving and growing.
The gap your team does not see
What does that mean for your sales organization? With 15% customer loss per year, your commercial team must fill that gap before any growth can occur. Acquiring new customers is estimated to cost five to seven times more than retaining an existing customer. That includes everything: marketing, sales, onboarding and the first months when you barely make any margin.
Your team works itself to the bone to bring in new customers. Meanwhile, customers leak out of the back of the customer base. It is mopping the floor with the tap running.
The frustrating part is that no one notices. Customers do not raise the alarm or pound the table. They leave quietly, never to return.
Why 85% is so tempting
85% sounds like a comfortable pass. That is why it is so deceptive. It is a number that is easy to read past.
I have calculated it for management teams several times. The response is almost always the same: silence. And then: “I had never realized that.”
There is no shame in that. Now that you know, you need to do something with it. Because while you think things are going well, your customer is already looking for an alternative. Not because they are dissatisfied, but because you are no longer relevant in their changing world.
What retention really tells you
Retention is not a report card. It is a mirror. It tells you how well your organization can meet customer expectations. Not last year’s expectations, but today’s.
A customer does not judge you by what you deliver. A customer judges what you deliver in relation to what they expect. Expectations change continuously, often without the customer realizing it.
Those who fail to respond lose. Not with a bang, but drop by drop. Like a dike developing a hole that slowly gets larger. By the time you see the damage, it is too late.
The question you need to ask yourself
Before you invest in the next sales action, ask yourself these three questions:
- What is our actual retention rate, measured in customers and revenue?
- How many new customers must our sales team win just to compensate for the loss, let alone grow?
- Which customers have we not spoken to at decision-maker level about their expectations in the past twelve months?
If you cannot answer those questions, you do not have a sales problem. You have a retention problem. That is good news, because it can be solved.
Do you want to know where your organization stands? Get in touch for a conversation about what retention could mean for your growth.
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