Did you know that customer retention is the most cost-effective method of driving growth for most businesses? The insurance industry has the highest initial customer acquisition costs of any industry. It costs seven to nine times more for an insurance agency to attract a new customer than to retain one.
The Cost of Marketing
Although as much as 80% of marketing budgets is spent on mass acquisition initiatives, research shows that the path to profitable growth is through the customers you already have, customer retention is a more reliable and cost-effective way of driving growth when compared to customer acquisition. Customer retention increases customer lifetime value and provides cost-effective revenue growth.
- Average customer retention rate within the insurance industry is just 84%.
Simplicity of Customer Retention
Every consumer wants more value for money. Insurers can meet this demand by employing digital, mobile and analytics to personalize customer interactions. They can also introduce services that are more relevant to consumers’ everyday lives. For example, 44% of insurance customers say it’s important that insurers provide personalized health advice.
This data points to the need for insurers to consider alternative distribution models that offer customers a fulsome suite of relevant products and services. Brands that stand out by enhancing customer engagement will be able to defend their pricing.
Benefits of Customer Loyalty
- A sustained 5% improvement in your retention rate can double profits in five years
- Reducing customer defections by as little as 2% per year is equivalent to cutting costs by more than 10%.
- The revenue of 1 repeat purchaser equals that of 5 new shoppers.
- Returning and repeat purchasers are up to 9 times more likely to convert than a new shopper.
- Referred customers have on average a 25% higher retention rate within the first three years than customers who come from any other source.