How to Retain Clients Longer Using the Lifetime Value Principle

April 20, 2021 4 min read

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If you can keep a client for two years instead of two months, your profitability goes up 12 times without any extra effort, marketing, sales or cost. It’s called the “lifetime value” principle.

Not only is keeping clients longer good for profitability, but also a whole host of other benefits:

• Clients get better results because they stay longer.
• They refer more people because they’re accustomed to working with you.
• They’re more committed to working hard because of the longer-term mindset.
• It’s a lot less hassle and headache to keep clients than constantly find new ones.
• Essentially you could have a business without doing anything else, just keeping the current clients you have happy.

Let’s say you charge an average of $250 per month, per client. At a normal retention rate of four months (on the high side), that’s worth $1,000 in revenue, minus whatever expenses you have from marketing.

If you keep that same client for 24 months, that’s $6,000 in revenue. That’s a 6X increase in revenue — but even more actually, because profitability goes up the longer you keep clients. You don’t have to “start-up” costs to attracting them to your company or service, except a negligible amount over the client lifetime.

Related: The Biggest Mistake Entrepreneurs Make? Believing That They’re ‘Irreplaceable’

So why would clients quit working with you?

First, there are unpreventable reasons, which make up less than 20% of client separation. Examples are:

• Relocation — Your client moves cause of job or family circumstances.
• Pregnancy — This can be a temporary leave of absence, but the client still steps your services.
• Financial — Your client loses a job or has unforeseen expenses, medical or otherwise. This is most likely out of your control, unless you do some type of bounce-back offer listed below.

Then, there are factors within your control, which accounts for why upwards of 80% of clients separate. Situations like:

• They find better service. Your client was only satisfied with your service and they found something better, closer or cheaper.
• Your services are no longer needed. Your client reached their goals, made progress or wants to do it on their own now. This is great, but you can still offer help through maintenance programs.
• The client just doesn’t like your service, period. You’ll usually find this out fairly quickly. It’s typically more of a quality control issue than maintenance, but it can be both.
• They aren’t seeing results. Sometimes clients may stay for a while, but in the end, it comes down to results. You need to make sure the client is doing their part to get the results they are after. 
• Not enough fun or motivation. Clients come to you for motivation and for something they couldn’t do on their own. Keeping the clients motivated and having fun will make them come essentially forever because they can’t get that anywhere else.
• They aren’t challenged. Challenge is an individual thing, and although a majority of your clients will be in the beginner/intermediate stage, some will need more of a challenge. 
• Too challenging.  Here, you have the opposite — and even more common — problem, especially for first-time clients. Don’t overwhelm clients from day one. This will prevent them from wanting to move forward with your relationship. Ease them in, keep the motivation and encouragement going so they’ll want to continue. 

Using the “Lifetime Value” principle will make a huge difference in your business and allow you to not only retain clients longer but also make more money without constantly acquiring new clients.