Measuring Client Retention

This presentation states that client retention, an important measure of client satisfaction, has significant business implications like institutional costs, productivity, income, public image, market saturation and financial sustainability.

As per the presentation:

• An organization's need to measure portfolio activity, track active clients, or measure client satisfaction will determine how client retention is defined;
• Industry wide techniques often use simple measurement formulae that are a function of client drop out over a specific time line.

However, the problem is more complex than it appears and a better definition of active client needs to evolve which should factor in:

• Clients who either enter or leave within a defined time frame and do not cross over the time/ point of measurement;
• Clients who have not yet reached a decision point get included as active clients;
• Clients with short loan terms, completing before point/time of measurement do not get included;
• Clients getting a loan renewal within the point/time of measurement get included and client renewals beyond the measurement date get left out.

The presentation states that all the above, when not built into the client retention formula, distort any measurement. The way to go forward is to have a more sophisticated way of identifying active clients and eliminating clients who have not yet reached a decision point.