Managing Customer Experience and Relationships. Don Peppers

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EXHIBIT 2.2 Benefits of CRM in Financial Services

      Source: Peppers & Rogers Group, Roper Starch Worldwide survey.

Retaining customers is more beneficial to the enterprise for another reason: Acquiring new customers is costly. Consider the customer acquisition cost (CAC) for the banking industry. Averaging across channels, banks can spend at least $303 to replace each customer who defects.²⁶ So if a bank has a clientele of 50,000 customers and loses 5% of those customers each year, it would need to spend $757,500 or more each year simply to maintain its customer base.²⁷ Many Internet startup companies, without any brand-name recognition, faced an early demise during the 2000–2001 dot-com bubble bust, largely because they could not recoup the costs associated with acquiring new customers. The typical Internet pure-play spent an average of $82 to acquire one customer in 1999, a 95% increase over the $42 spent on average in 1998.²⁸ Much of that increase can be attributed to the dot-com companies' struggle to build brand awareness during 1999, which caused web-based firms to increase offline advertising spending by an astounding 518%. Based on marketing costs related to their online business, in 1999, offline-based companies spent an average of $12 to acquire a new customer, down from $22 the previous year. Online firms spent an unsustainable 119% of their revenues on marketing in 1999. Even with the advantages of established brands, offline companies spent a still-high 36%.

      The problem is simple arithmetic. Given the high cost of customer acquisition, a company can never realize any potential profit from most customers, especially if a customer leaves the franchise.

      The problem is simple arithmetic. Given the high cost of customer acquisition, a company can never realize any potential profit from most customers, especially if a customer leaves the franchise. High levels of customer churn trouble all types of enterprises, not just those in the online and wireless industries. The problem partly results from the way companies reward sales representatives: with scalable commissions and bonuses for acquiring the most customers. Fact is, many reps have little, if any, incentive for keeping and growing an established customer. In some cases, if a customer leaves, the sales representative can even be rewarded for bringing the same customer back again!

Although it's always somebody's designated mission to get new customers, too many companies still don't have anybody responsible for making sure this or that particular customer sticks around or becomes profitable. Often, a service company with high levels of churn needs to rethink not only how its reps engage in customer relationships but also how they are rewarded (or not) for nurturing those relationships and for increasing the long-term value to the enterprise of particular customers. Throughout this book, we will see that becoming a customer-value enterprise can be difficult, depending on the category. It is a strategy that can never be handled by one particular department within the enterprise. Managing customer relationships and experiences is an ongoing process—one that requires the support and involvement of every functional area in the organization, from the upper echelons of management through production and finance, to each sales representative or contact-center operator.

EXHIBIT 2.3 Customer Acquisition Costs (2020)

      Source: Rishabh Rathi, “Customer Acquisition Cost by Industry: How to Calculate CAC?” February 14, 2022, available at https://startuptalky.com/cac-by-industry/, СКАЧАТЬ