Which is more important . . . acquiring or retaining customers?

Many financial institutions fail to establish proper strategies for acquisition of customers and hence they fail to retain them as well. Consequently, many financial institutions are unable to build long-term profitable relationships with the vast majority of their customers. According to research firm Celent Communications, retail banks face challenges in building customer relationships, especially in the United States. While annual customer attrition rates are 2 percent in France and 4 percent in the United Kingdom, U.S. rates reach double digits. A survey done by Council on Financial Competition has determined that the U.S. attrition rate in 2002 averaged 16 percent. I believe, in order to address the issue of attrition it is important to find out why customers are leaving in the first place. You must aim to identify the critical challenges that exist in both the internal and external environment which may contribute to the problem. Do you have competitive rates, convenient service and exceptional customer service? How about your response time to customers’ requests? We live in a society of instant gratification. Financial institutions are force to provide services 24/7 through online banking to allow for instant services to customers. However, the point is, once you have a good grasp on why the customers are leaving you can put measures in place to correct the variables that are within your control. Otherwise much time and effort will be spent in acquiring customers that you won’t retain. If you have a leaking vessel there is little point in you trying to keep it filled. You first must stop the leak. This begs the question which comes first the chicken or the egg? Should the focus be on acquiring new customers or on retaining current ones? The truth is you should apply a “both and strategy” instead of an “either or strategy”. Retaining customers requires a thorough analysis of your current customer’s needs, perception and satisfaction level. Acquiring customers require careful targeting and skilful matching of their needs to your products and services. What are your thoughts?