Market research continues to show that it costs more to acquire a new customer than retain an existing one.
Depending on the research source and the market or sector, results indicate a cost of 5 to 25 times more, to acquire a new customer compared to retaining an existing one.
One study found that increasing customer retention by 5%, could increase profits from 25% to 95%. Another study found that the success rate of selling to an existing customer is 60% – 70%, while the success rate of selling to a new customer is only 5% – 20%.
These results underscore the value of retaining customers.
What it means for Super funds
For Super funds, where results from our latest CSBA Superannuation CX Benchmarking report showed that 24% of members intended to switch funds, it is time to dive deeper into understanding retention, exploring what it would take for members to reconsider.
Switching intention was even higher for members without recent contact (27%), younger members (29%), and shorter tenure members (25%). And the numbers are increasing. Looking at those members who considered a switch in the last 12 months, future switching intention increased from 49% to 63% compared to the same period in 2021.
One of the best indicators of service quality is how well a fund retains its members, explained CSBA CX Director of Finance, Sam Monteath.
“On the flipside of retention is churn. Losing members to competitor funds or SMSF is a huge threat,” she said.
“If you want a robust strategy to keep customers, you need to understand why they are ending their relationship with you. What can we learn from their behaviour to prevent further attrition?”
“Look beyond the retention or exit rate,” warns Monteath. “Rich data and insights into the ‘why’ are what’s critical.”
Emily Barnes, Head of Insights and Design at Equip Super agrees, explaining the importance of hearing first-hand from members who choose to leave.
“We are developing a deep understanding of our retention drivers as we track change in sentiment over time; enabling us to measure the impact of our CX programs at the back end of the customer lifecycle,” she said.
“Our bespoke exit research program run by CSBA has empowered us to make adjustments in real time to address customer pain points.”
Insights impact customer retention
Exit research can drive improvement by enabling super funds to:
- Capture verbatim feedback from exit members and understand their decision to leave.
- Identify how exit triggers differ among member cohorts.
- Establish key areas for improvement to eliminate roadblocks or convince members to stay.
- Plan marketing strategy and CX approach.
Retention vs acquisition
A customer acquisition strategy would be futile if it doesn’t work in sync with a retention strategy. One cannot perform well without the other. It is a waste of resources to acquire more members if little is done to keep them.
The value of retention should not be underestimated. Not only do existing members provide opportunities for growth through upsell and cross-sell, but they are also effective brand advocates, and their loyalty serves as the best endorsement of brand strength and trust.
The ROI speaks for itself. When it is five times more cost-effective to retain members than to acquire new ones, it makes good financial sense to maximise the Customer Lifetime Value of your members.
The power of independent research
The ability to capture the voice of the customer in verbatim is powerful. Even more so for former customers. When it comes to ex-members, super funds have found higher response rates and increased engagement when research is conducted by independent experts external to the fund.
Monteath: “The team at CSBA are skilled in interviewing and identifying the smallest nuances that have big impacts on customer experience.”
“We collaborate with all our clients to design a bespoke program developed in line with industry best-practice, to provide expert analysis, insights and guidance in optimising retention.”
For more information on CSBA’s Exit Member Research, contact sam.monteath@csba.com.au
