The Challenges of Measuring Client Retention

Paper
Date Published: 
Jan 2006
Author: 
Waterfield, C.
Publisher: 
Document TitlePagesSize
30

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A technical note on the history of microfinance's effort to measure client retention and improve it

This paper outlines the challenges of measuring client retention, gives the rationale for measuring client retention, and presents implications of the same. The paper elucidates critical differences between client retention and client satisfaction, and highlights:

  • The complications in retention;
  • The difference between client retention and product retention.

The paper analyzes the dynamics of client retention and client desertion. It classifies client retention into the following categories:

  • Immediate renewal;
  • Resting;
  • Graduation to another product.

It classifies client desertion into the following categories:

  • Rejected;
  • Dissatisfied;
  • Satisfied, but no further need.

The paper defines client retention, and provides a simple formula for calculation of the retention rate using a timeline, where resting clients are included in the definition of clients. It then modifies the retention rate formula by:

  • Complicating the timeline;
  • Including clients in the timeline.

Lastly, the paper develops a new formula for client retention rate by adjusting the formula for decision points. It:

  • Concludes that most MFIs will be able to garner data to calculate basic ratios;
  • Cautions that with data limitations in MIS softwares may inhibit calculations of advanced ratios.
Type: 
Paper