While the drive to acquire new clients is natural for building your practice, it is equally — if not more — important for you to focus on retaining the clients you have. That’s why you should budget for client retention just as you would budget for client acquisition, says George Hartman, managing partner with Elite Advisors Canada Inc. in Toronto.
“It is good public relations to say clients have been associated with you for a long time,” Hartman says. “And client retention increases the value of your business.”
Here are five reasons why you should optimize client retention:
1. It costs less to retain than to acquire
Acquiring a new client costs much more than retaining a client you already have. While there are no definitive studies on acquisition and retention costs in the financial services industry, Hartman says, research in the retail industry indicates that it costs at least six to seven times more to get a new client than to retain an existing one.
For financial advisors, those acquisition costs may include expenses for marketing and advertising, seminars, workshops, collateral material, trade shows, networking events and other programs.
2. Existing clients can have a greater lifetime value
Over time, Hartman says, an existing client may provide you with referrals, and those referred clients may in turn provide additional referrals. The “multiplier effect” of the revenue obtained from the stream of referrals can be significant over the long term, enhancing the lifetime value of an existing client.
“The longer you keep clients,” says Nadira Lawrence-Selan, marketing and communications consultant with Hathleigh Consulting in Woodbridge, Ont., “the more likely you are to get a bigger share of their wallet.”
3. An existing client is an investment worth protecting
You have already spent a significant amount of time and money on acquiring your existing clients. Retaining those clients, Hartman says, is a way of protecting that investment.
Further, says Lawrence-Selan, there are no guarantees that expenses incurred to acquire new clients will pay off. In other words, “a bird in the hand is worth two in the bush.”
4. Less resistance to new products
Because existing clients already know you, they are usually more receptive to your suggestions of new products that would help them reach their goals. “It is much easier to promote new products to existing clients,” Lawrence-Selan says.
“You will get a warmer reception and an open ear,” Hartman adds. “In fact, you have an obligation to share new product offerings with your best existing clients first.”
5. Trust is already established
Existing clients already know and trust you, making it easier for you to deal with them.
“They might have already referred you to their friends and colleagues, making them valuable,” says Lawrence-Selan. “It will take time to gain the full trust and loyalty of a new client.”
It can also take much longer before new clients start to generate additional value to your practice through referrals.
This is the first part in a two-part series on client retention. Next: Techniques for retaining clients.