Acquisition rate is an important metric because it measures the growth of your customer database. Monitoring it on a regular basis allows you to see how well your marketing converts prospects into customers.
Attracting customers is great. Keeping them is better. While attrition is a natural process in the customer cycle, if it is greater than 3 – 5% of the house file, there is a problem. If attrition exceeds acquisition, your business is sinking one customer at a time.
Acquisition and attrition rates are funky metrics. Sometimes you have to dig into your data to understand their meaning. For example, a niche company with 20% acquisition and 8% attrition appeared to be doing well. Acquisition exceeded attrition, sales are up, and costs are down. When an enterprising manager decided to look deeper, he found that the customers leaving were more valuable than the new customers coming in. The company’s marketing program for acquiring new customers was alienating the existing customer base.
It isn’t enough to know how many customers you acquire or lose, you have to also know their value. If your new customers are less valuable than the ones you are losing, then your costs have to be aligned accordingly.
Note: This is an excerpt from 10 Hidden Signs Your Company is Sinking. Go to www.wilsonellisconsulting.com to download your free copy.