Jeff Judy

Jeff's Thoughts - July 29, 2015

Acquisition vs. Retention: Choice or Process?

Intellectually, we all know that building a solid customer base requires both the steady acquisition of new customers and the successful retention of most of the customers who are already on board.

In practice, however, the staff at most institutions inherently experience more excitement over booking a new customer, compared to maintaining a relationship. And incentives and rewards frequently tilt the field well in favor of acquisition.

What's wrong with that? Well, maybe nothing, and maybe a lot, depending on your actual practices. Mind you, I'm sure that acquisition and retention enjoy parity in your stated policies and official strategies. But we're talking about what actually happens, and particularly, how it happens.

For example, how do you win those new customers? Is it all your great service, your many convenient ways of dealing with your institution? Is it your patient consultation with them, understanding their needs and desires so you can steer them to the right products and services?

Or is it based on undercutting the competition: easier terms, lower pricing, less scrutiny? That's like the old stereotype of the free toaster with a new account: it leads to customers hopping from one institution to another, on a regular basis, to keep earning those "new customer" incentives. Those acquisition practices are undermining retention from the start.

Do you review your acquisition and retention strategies on a regular schedule and make adjustments? After all, in some market conditions, acquisition opportunities may be higher, in others, retention may provide a greater return on your efforts. Just carrying on with what worked last year is unlikely to produce great improvements in your customer base.

I recommend getting out of this "either-or" pattern of thinking in the first place. Every staff member should have a sign on their desk that reads:

"Acquisition is the first step in retention."

In other words, getting a new customer and holding on to that customer should be viewed as one continuous process rather than as separate, perhaps even competing, strategies.

I've already mentioned that relying too heavily on short-term incentives to win customers can work against long-term retention. I'd add that good customers, with healthy financials, are better candidates to become loyal customers. That means that by paying a little more attention to qualifying new customers as you encounter them, you save time, money and effort to hold on to those customers over the years.

Given the attention it deserves, your customer retention activities can be a great value for your institution. But the best customer retention happens when landing and keeping a customer are both part of the same philosophy, are both discussed by the same managers at the same time, and are connected in a continuous process that will, in the end, offer you a significant competitive advantage over your rivals.