Customer retention- How does your MSP practice stack up?
Written by Myra Snyder, Sr. Manager, Certifications & Analytics
Keeping acquired customers is central to running and building a sustainable managed services business. Even if you are retaining the majority of your customers, how can you tell that it is enough? To answer this question, the MSPAlliance is tracking the customer retention of members in its MSP Verify program.
Customer retention is the rate at which existing customers remain with your company. The rate at which customers stay with (and leave) the company is important for many reasons. Your company’s growth will be severely stunted if existing customers are leaving in droves, even if new business is booming. This is because new customers require more resources from a company, such as sales and marketing.
The graph below shows the average customer retention rate for MSPAlliance Verified members each year. Customers can leave an MSP for several reasons. Sometimes the customer finds another MSP that provides the same services at a lower cost, or provides a higher value for the same cost. However, customers may also leave an MSP due to poor performance, such as poor customer service or long help-desk response times. There are also other reasons customers leave an MSP having nothing to do with the quality of the managed services they received. When companies are acquired, change strategic business direction, or do so out of business, these are all factors which implicate customer retention rates but do not reflect on the quality of services being delivered by the MSP.
Customer retention for members has been relatively stable for the past three years, indicating that certified members on average have excellent customer retention. Certified members represent some of the highest quality MSPs as they have committed to continuous improvement of their processes and services. Keep in mind that the 2019 metric is subject to change.
How Does Your MSP Practice Compare?
To compare yourself to the Verified members, calculate your customer retention following this formula: Number of customers on Jan. 1st 2018 – Total customers Lost in 2018. Then, divide that value by the number of customers on Jan. 1st 2018. For example: (25 Customers – 4 Customers Lost)/25 Customers = 76% Customer Retention Rate.
Customer retention is one of many metrics that can indicate the health of your MSP. This metric is important because it shows your MSP practice how many customers stick with your services once they sign up. If you want to improve your customer retention but don’t know where to start, feel free to contact MSPAlliance.