Deepen customer relationships with e-mail marketing!
According to Gartner Research, it’s five times more expensive to acquire a new customer than to retain a current one. That’s why many financial institutions are taking this opportunity to expand their share of wallet using e-mail marketing.
With a staggering 70% ROI, e-marketing is hitting the mark in terms of reach and return. Financial institutions around the country are doing the math, and finding that as a customer retention and organic growth strategy e-mail marketing is proving itself over and over.
Do the Math.
Calculate the Cost of Churn:
Further proof of the effectiveness of e-mail can be found in the book The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value, by Frederick F. Reichheld and Thomas Teal, which reports that customer churn rates decrease drastically when customers stay connected to the brand. It goes on to report that, on average, as little as a 5% reduction in customer churn can positively impact net profits by as much as 20%. In the banking industry this positive impact has been estimated to be as much as 80%.
Your customer contact doesn’t have to be high tech. An old-fashioned phone call or in-person meeting can do wonders for your customer retention rate. In his book, The Customer Loyalty Solution, Arthur Middleton Hughes says: “Communication, by phone, E-mail, direct mail or, if need be, in person can keep a customer on the verge of defection from leaving.”
WHAT IMPROVED CUSTOMER RETENTION CAN MEAN TO YOU
Do the following calculation to determine your own institution’s potential revenue gain by reducing customer churn: Write down the average annual revenue stream from a typical commercial client. Then multiply that figure over the estimated lifespan of a typical client relationship. That gives you the LTV, or lifetime value, of a customer. Having calculated a customer’s LTV, you can begin to see how even the smallest decrease in customer churn can have an enormous impact on your bottom line.
If you are not sure of your average annual revenue stream per client, then consider some numbers calculated using the 2006 Treasury Strategies Benchmarking Database. For middle-market clients (having annual revenues of up to $1 billion), the average annual bank profit on an active account is $5,723. Given that the average lifespan of a commercial relationship is 8 years, the LTV of your average middle-market relationship is $45,784.
For large corporations (having annual revenues of more than $1 billion), the average annual bank profit on an active account comes to $63,677. Using the same 8-year average relationship lifespan, the LTV of your average large corporate relationship is $509,416.
Source: Excerpt from the American Banker’s Association report entitled “The Financial Institution’s Guide to E-Mail Marketing” 2006
