How To Retain Clients Longer Using The Lifetime Value Principle – Without any additional effort, sales, or cost, if you can keep a client for two years instead of two months, your profitability increases by 12 times. It’s known as the “principle.”
Not only are there financial benefits to staying longer, but there is also a slew of other advantages:
- Because they stay longer, clients get better results.
- Because they’re used to working with you, they refer more people.
- Because they have a longer-term perspective, they are more committed to working hard.
- Keeping clients is a lot less work and time-consuming than constantly looking for new ones.
- You could have a without doing anything else if you just kept your current clients happy.
Let’s say you charge $250 per month on average per client. With a typical retention rate of four months (on the high end), that’s worth $1,000 in revenue, minus any marketing expenses.
That’s $6,000 in revenue if you keep the same client for 24 months.
That’s a 6X increase in revenue — or even more because profitability rises as clients stay with you longer. You won’t have to pay any “start-up” costs to attract them to your company or service, aside from a small fee throughout their lifetime.
So, why would clients stop doing business with you?
First, there are unavoidable circumstances, which account for less than 20% of client separations. Here are some examples:
- Relocation — Your client relocates due to a change in employment or family circumstances.
- Pregnancy — Although this is a temporary absence, the client will still require your services.
- Financial — Your client loses his or her job or incurs unexpected medical or other expenses. Unless you do one of the bounce-back offers listed below, this is most likely out of your control.
Then some factors are within your control, which accounts for up to 80% of client separations. Situations such as:
They can obtain better service.
- Your client was only satisfied with your service and went out of their way to find something better, closer, or less expensive.
- Your assistance is no longer required. Your client has achieved their objectives, made progress, or wishes to proceed on their own. This is fantastic, but you can still assist with maintenance programs.
- The client does not enjoy your service.
- This is usually discovered relatively quickly. It’s usually a quality control issue rather than a maintenance issue, but it can be both.
- They don’t see any progress.
- Clients may stay for a while, but it all comes down to results in the end. You must ensure that the client is doing their part to achieve the desired results.
- There isn’t enough enjoyment. Clients come to you for encouragement and assistance with something they couldn’t do on their own. Keeping clients motivated and having fun will keep them coming back for a long time because they won’t get that anywhere else.
They aren’t put to the test.
Although most of your clients will be in the beginner/intermediate stage, some will require a greater degree of difficulty.
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It’s too complicated.
In this case, you’re dealing with the polar opposite — and even more common — issue, especially with first-time clients. Don’t put your clients under a lot of stress right away. This will make them unwilling to pursue your relationship further. Ease them in and keep them motivated and encouraged so they’ll want to keep going.
Using the “Lifetime Value” principle in your business will allow you to not only retain clients for longer but also make more money without having to acquire new clients constantly.