The Real Causes of Client Turnover and How to Stop it
Carl Maerz | Rocket Referrals | www.rocketreferrals.com
Turnover isn’t just painful, its also downright confusing. One day a client is nothing but smiles and the next, poof, they’ve fled to your competitor down the street. What’s more, they left without expressing a single complaint. Come to think of it, they didn’t say much of anything during the months leading up to their departure. So how were you to know they were unhappy?
This problem regularly haunts businesses that are dependent on client relationships for their existence. No matter how well they perform their job they continue to lose clients. Most people we speak with—at least initially—believe that price is the largest contributing factor to whether their clients stick around or not. That’s the reason they’re usually given when their clients defect, anyway.
The preponderance of research and psychology we studied said otherwise. But to know for sure Rocket Referrals conducted a study of our own. Over the past couple years we collected more than 20,000 Net Promoter Score (NPS) responses from more than 200 insurance agencies. We sorted them anonymously by type (negative, neutral, positive) and looked specifically for comments that highlighted reasons for dissatisfaction—a forerunner of client attrition.
As we suspected, price isn’t the biggest culprit. It turns out that, when asked, clients only claim price is the reason, even though it’s likely not the case. This usually happens either because the person is looking to avoid conflict, or because another reason allowed price to become an issue.
Our research showed that, of those clients that eventually defect, 81 percent do so because they lack regular and meaningful communication from the business. This includes following up on questions or specific issues in a timely manner, periodic checkups, returning phone calls, and the overall access a client has to an actual person.
These gaps in communication are forming a perceived indifference; meaning they start to feel like the business doesn’t care much about them. This quickly degrades client loyalty and—like a weak immune system that begets sickness—clients defect at the first opportunity that presents itself. So, if a cheaper option pops up, they will certainly take it. But this doesn’t mean that’s necessarily the reason they leave.
We also found that the average service-based company is at risk of losing about 20 to 25 percent of its business each year. Of these at-risk clients well over half could be prevented from leaving if they were communicated with more frequently. But the occasional email or newsletter doesn’t cut it. The communication needs to be personal and meaningful. In other words, they need to know you care and have their back.
How to improve client retention
Its been established that regularly communicating with clients is the best way to keep them around. But in order for this communication to fully resonate with clients, it must also be meaningful, timely, and authentic. In other words, sending bcc’d emails to your client list doesn’t do much to make them feel loved. Likewise, not returning phone calls or emails is equally as detrimental to client retention. For businesses to be great communicators they must be both reactive, and proactive in their approach.
Being reactive in your communication is as simple as getting back to clients in a timely manner. Perhaps this goes without saying, but from our experience most business owners don’t know just how important this is. One of the top complaints we found by analyzing the negative feedback of clients of service-based companies was the lack of returned phone calls. There is perhaps no faster way of showing your clients you don’t care much about your relationship.
Communicating proactively with your clients means that you are reaching out to them regularly with meaningful content on your own accord. This communication needs to be personalized, valued by the client, and happen over time. The examples below represent ways to proactively reach out to your clients as to eliminate perceived indifference, and aid in client retention.
At Rocket Referrals we’ve pinpointed proactive communication shown to be effective at increasing client retention. Consider implementing some of the following into your agency.
- Handwritten welcome cards to new clients
- Handwritten loyalty cards to promoters
- Policy review a couple months before renewal
- Returning phone calls
- Handwritten birthday cards
- Handwritten holiday cards
- Periodic meaningful newsletters
- Handwritten thank you cards for referrals
- Encourage promoters to leave testimonials and reviews
Of course implementing all these touch points in this agency could be quite the endeavor. That’s why we created Rocket Referrals for agencies, like yourself, to put much of this communication on autopilot. I encourage you to give us a look with a quick 30-minute demo of our software. Rocket Referrals would love to help!