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Retention, Retention, Retention

​​​We all talk about retention and we know how important it is to realize growth.  However, I have found that many agency owners have no real insight on their actual retention.  Many agents that I talk to will guess and say “95%” without any real sense of how they arrived at that number. 

If an agency sets a goal to grow their book of business by 10%, they need to know their retention ratio.  Using simple math, an agency with a one million book of business with 100% retention only needs to add $100,000 in premium to meet their goal.  While the agency down the street with 85% retention rate needs to work much harder by adding $250,000 to realize the same goal. Knowing your true retention rate is crucial to measuring growth.

Fortunately, many agency management systems can give agencies a snapshot of their retention.  However, like anything else, the information that you pull from your agency management system is only as good as the information that you put in to it.

Another simple way to calculate your customer retention rate is to locate a few key numbers:

Retention Rate = ((CE-CN)/CS)) X 100 

C= number of customers at end of period

C= number of new customers acquired during period

CS = number of customers at start of period 

Once you understand your retention rate, you can accurately measure your growth and proactively plan your strategies to grow your agency. 

Agency owners need to look at retention as a sales strategy.  It is equally (if not more) important than your new business acquisition strategy for every boost in retention will increase bottom line profits.  Studies have shown that $1 paid towards customer retention increases profits by more than $5 spent on new customer acquisition.

Now…how do you improve your retention?

Retaining your customers is based on a variety of procedures that should be set up in your agency.  I recommend that you initiate as many of the below strategies to effectively boost your retention.  Also remember that a retained customer is a strong source of referrals.

 

 

Written on May 3, 2018 by Peggy Corbett



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