Customers are the most important asset for any organisation and the loss of key clients in today's economy can edge companies closer and closer to peril. If a company hopes to grow, it needs to invest in its customers. But which one's?
Start collecting information to assess your organisation's current standing in its efforts to strategise for growth. Consider these three questions concerning your customers:
- How much new business can we expect?
- How much existing business can we expect? What kind of growth can we expect from our current customers, especially those in our key accounts?
- How much churn should we expect? How much business isn't going to repeat? How much attrition from existing accounts are we likely to see - and what can we do to prevent it, compensate for it, or turn it around?
Customer churn
While all customers contribute to the bottom line, not all departures affect a company in the same way. Knowing your organisation's churn rate can provide a window into your current customer situation.
Customer churn refers to the amount of clients that leave your company. It can be found by dividing the number of customers that discontinue a company's service within a specific amount of time by the number of total customers within that same time frame.
(x) = % of Customer churn
(y)
Where:
(x) Number of customers to discontinue in specific amount of time
(y) Average total number of customers in same time period
For example: Acme ABC lost 25 customers between August and November from a total of 500 customers.
25 = For that time period, Acme ABC's customer churn
500 is .05, or 5 percent.
The right steps forward
Those accounts that can make or break your business need to be managed, nurtured and grown. So how do you determine which customers are worth channeling efforts to in order to keep them close?
The secret lies within the customer's strategic potential, not their size. Because of the costs involved with drawing close to key customers (time, energy, finances), evaluate which companies are truly worth the investment.
Customers that exist within a growing market (green technology v. oil) can be considered strategic clients, as can customers that have a more prestigious brand name. By choosing the top clients that represent a greater return for the investment of time, you can draw your company's most important assets closer.
Here are five critical criteria that can help gauge which accounts should be considered strategic. They must:
- Be an existing account
- Have the ability to generate revenue in the coming year
- Provide a mutually beneficial environment
- Desire a long-term relationship with your organisation
- Provide access to all buying influences and key executives
Losing customers is an unfortunate part of business, but knowing how your organisation currently stands can help you build a foundation to reduce customer churn as well as identify the accounts that will best align with your growth objectives.