McKinsey & Company has revealed a top-secret competitive advantage for incumbent companies: their existing customers.
Customer retention is almost always less expensive than customer acquisition. And the data supporting that common knowledge is striking: McKinsey found that the most effective growth companies produce 80% of their value “from their core business – principally, unlocking new revenues from existing customers.”
It’s tempting to spend resources on aggressively chasing new customers, partly because that’s what competitors and new entrants to the industry are likely doing – and taking your lunch money while they do it… But when companies play that game, they’re ignoring the tremendous additional value that exists in their current base of customers. Instead, McKinsey bluntly recommends that companies “Shut up and listen to your customer,” and focus on improving their experience.
In PriSim’s business simulation classes, participants assess and manage their customers’ experience through:
- Policy retention/renewal rates in our Insurance Challenge carrier simulation.
- CPAR (Contractor Performance Assessment Report) ratings in our BizFighter A&D simulation.
- CSI (Customer Satisfaction Index) scores in our Broker Challenge and Test Drive
Put another way, McKinsey’s message in a bottle to incumbent companies is to growth up, salvage your depreciated thinking, and pay attention to your existing customers. And to stop sending out an SOS (Shiny Object Syndrome) looking for new customers…