Probably one of the most overused expressions in management is “Acquiring a new customer is more expensive than keeping an existing one.” Although there are numerous serious surveys supporting this, many of the times it goes hardly beyond words. Maybe this is most valid in the direct selling industry, unfortunately.
Have you ever seen someone describing the recruiting process via drawing a funnel? Well, I have seen many. And each time I come across, I also get amazed with this short sightedness.
I am not saying here that a company’s growth strategy should be purely based (or even heavily rely) on retention. This will fail in bringing the desired rate of growth. That said, should the industry almost totally forget about keeping the existing members and focus almost solely on acquiring new recruits? My answer is “No”.
However for decades, this has been the opposite. And few of the obvious consequences are:
1) Unncessarily costly operations for companies.
2) Less-than-satisfied ex-direct sellers on the street.
3) Poor image for the whole industry.
I am glad to see at least one company has taken this issue beyond words, has conducted a study based on its own figures and publicized it. Tupperware CEO Rick Goings announced that they had made a regression analysis to calculate their lost-business due to attrition. He said, had his company’s retention been 2% better over the past six years, Tupperware would have had $800 million more in sales. For you to visualize what this number means, this translates into a 5.5% lost revenue for Tupperware in the same period.
One can argue now why Tupperware did not touch this issue before. Its investors might have already raised this question. We observers should take it from a positive perspective and expect all others to follow, in my opinion.
Isn’t this analysis from Tupperware convincing enough for you to at least do a similar study using your own figures?