Help staff understand the need for retention.

• Author: Clapp, Bruce
• Position: Customer Retention

Retention is an issue that is best addressed by all staff, at all times, yet with a focused level of effort. To that end, we need to clarify the issue and level-set performance and expectations.

In this month's discussion, we will review the three steps for you to take at your bank to remove the "mystery" associated with retention and attrition.

First, the easiest method is to use common definitions for retention and attrition. Common definitions will provide clarity to "who" has done "what" and what the relative "impact" is to the bank.

Retention: Keeping a customer as a customer.

Attrition: When a customer leaves the bank and is no longer a customer.

Attrition Cost: The relative cost/expense of customers leaving the bank Clarifying the definitions creates focus on the "who" and "what" and creates a common ground for marketing and service efforts.

Second, to create a "visual picture" of the impact that retention/attrition has on your bank, you must communicate the dollar/budget relationship to losing customers. I recommend a "simple math" calculation for the impact retention (or the flipside attrition) has on your bank. To keep it simple, there are two variables to consider: income and expense.

If one customer, on average, represents $250 in annual income, then one lost customer represents $250 in "lost" income. If it takes $125 to recruit a new customer, then the expense for acquiring a new customer to "replace" the lost customer is $125. So, the simple math equation is:

"A" (number of lost customers) multiplied (x) by "$250" Plus (+) "B" (number of replacement customers) multiplied (x) by "$125" = Annualized Attrition Cost

Therefore, if we have 50 "lost customers" and 25 "replacement customers," the annualized negative dollar impact to our bank is (50 x 250) + (25 x 125) = $15,625. Defining the impact numbers paints a picture that is both compelling and hard to...