Mike Larkin, a 40-year sales veteran, calls churn a silent killer that half of companies don't even track. A 5% reduction in churn can boost profit margins by 30%, and a 25% churn rate requires 35% more new customers just to hit 10% revenue growth. Cable and retail average 25% annual defection.
I hope everybody's having a great day today. Uh, topic I'm going to talk about a little bit here is customer defection and how it is a silent killer for any business. Um, in my 40-plus years of selling, I have worked with hundreds of different businesses. I have noticed that, uh, people have really not taken a look at customer defection. over the years. It's getting better. In my surveys that I've done here last year or so, there's about a 50-50 split of companies that keep track of their customer defection and companies that don't. It's a key performance indicator, and I think you should be doing that. So today we're just going to go— I'm going to just ask 4 questions here just to make you start thinking about customer defection and how you can reduce it. Question number 1, do you know your annual defection rate in your industry? This is an incredible tool just to compare yourself with your industry. A lot of industries are at 25-30% defection rate, and if you're down around 15-20%, you're doing a great job. Number 2, do you know the defection rate in your company? Like I said, 50% of the people that— 50% of the company owners out there don't not know their defection rate. There are ways to figure that out, and I can help you out if that's something that you would like me to do. Would you like to know the impact of defection on your business? It's incredible. If you have a 25% defection rate, it'll take 35% of new— 35% more new customers just for you to grow 10% for that year. And then the cost of getting a new customer is so much higher than keeping the customer too. So, and fourth and final, do you know the impact to your bottom line of defection improvement? Studies have shown that if you can reduce your defection by as little as 5%, that can affect your bottom line by 30%, your profit margin. So that is something that you really need to take a look at. I'm going to take you to A website that I found here, and it's interesting. This is a customer churn rate in the United States for 2020 by industry. You can see cables 25%, general retail 24%, financial 25%, online 22%, telecom 21%, and so on. So this is something that, that will help you figure out what you— how you can compare it to. So in closing here, I would love to hear if you guys are tracking your customer churn rate. If number 2, what are you doing to reduce that? And number 3, what any kind of advice you can give us out here. We're all business people. We all need to know what we can do to help grow our businesses profitably. Have a great day and have an attitude of gratitude.
