skip to Main Content
Back to Insights

Why Every CEO Should Own Customer Retention


    Customer retention is critical to any company’s business model. Every company spends good money attracting and acquiring customers, and this simply goes to waste if you don’t retain them over time. At minimum, every company wants to recover its initial sales and marketing expense, however customers become more profitable through their lifetime … so the longer you retain a customer, the better the ROI and profitability of your business.

    Many companies will assign customer retention responsibility to one functional leader. After all, product should create a product, business development should do deals, marketing should drive awareness, sales should sell, and G&A functions should keep a company humming.  What is left over, i.e., managing the customer experience and lifetime value of those customers is often thrown to a support function, “Customer Success”, or marketing (when there is significant opportunity to cross-sell additional products – such as in e-commerce or financial services). But having any one function owning customer retention or lifetime value is a mistake. 

    A customer’s reaction to your product or service is valuable information that should guide every department. Without a customer-back mindset and incentives, functional leaders run the risk of optimizing near-term goals without doing what is in the best interest of the company’s long-term financial health…retaining customers.

    Examples of how customer retention touches each business function   

    • Marketing – For Marketing groups who primarily focus on acquisition the goal is to maximize awareness, consideration, and perhaps purchase in consumer businesses.  In doing so, are you setting the right expectations for customers? You may believe your product and brand are amazing – but to a customer it is all about the best solution to the job they are trying to get done.
    • Sales – It can be particularly challenging to balance short and long-term objectives when there are aggressive sales targets to be met. However, if you bring in customers who aren’t a right fit for your product or service they will surely leave you, sooner or later, – and the financial investment made in sales and commissions is sunk. Do you understand what drives long-term customer retention?  Are these embedded in your pre-sales process?
    • Business Development – Deals are hard to get done. Strategic and channel partners often have their own set of objectives and sometimes this can create a misalignment of what is best for the customer. Entering into a deal, do you know how this will impact your existing customers? If the deal is to acquire new customers, will the sales channel allow for the right type of sale? Who manages the customer experience after initial acquisition? Does your partner have aligned metrics and financial incentives to drive long-term customer value?
    • Product – In my experience, product is often one of the most-aligned functions in terms of driving long-term customer value.  Generally high usage and satisfaction with a product will naturally translate into increased customer stickiness and loyalty. One potential misalignment in a world of limited resources is innovation vs. marginal improvements. Often small marginal improvements can seem trivial compared to launching (and announcing!) the next big feature or product. Take for example small improvements to the user interface of a software product – easy and trivial to implement from a product perspective, but potentially a big driver of user engagement.
    • Finance – Efficiency and precision matter in Finance, however at times this can be at odds with what is best for your customer. For example, does your collections process try to “win back” a customer – or focus strictly on collecting payment? Are your accounting policies flexible enough to enable true experimentation with concessions or gestures of gratitude? Do your planning goals take into account short-term investments that may be required for long-term customer ROI?

    Putting cross-functional customer retention into practice:

    CEOs I have spoken with are generally intrigued by and supportive of this “it takes a village” philosophy to maximizing customer lifetime value. After all, who doesn’t want a more successful and profitable business? Here are a few tactical approaches to driving this in your organization:

    • Make customer retention or lifetime value a company level goal. Most CEOs have a few goals they rally the company around – make customer value as important as sales growth, product engagement, profitability or employee engagement. Set targets and review progress regularly with your entire organization and shareholders. A previous post “Churn out Churn:  Five Steps to Serious” has some pointers for goal-setting.
    • Align incentives. Put your money where your mouth is and incentivize your entire top team on customer lifetime value. If a significant amount of compensation is in the form of company equity, demonstrate the impact customer lifetime value has on valuation over time.
    • Appoint a Chief Customer Officer, or other cross-functional retention leader. Let someone analyze, prioritize, and coordinate cross-functional efforts to drive customer value. I have seen many CCOs have limited effectiveness as providers of interesting customer insight, but not necessarily able to incite change or bring customer-back initiatives to the top of a functional leader’s agenda. Success will require real accountability and mandate to drive change.
    • Give assignments. Have every functional leader identify at least one initiative their function owns that drives customer retention.  Make it core part of their strategic plan and drive accountability.

    I would love to hear your thoughts, ideas and lessons-learned on this type of an approach to driving customer lifetime value.

    Monica Adractas is VP, Customer Success at Box where she leads cross-company customer retention and churn initiatives. Previously, Monica was a Principal at McKinsey & Company where she served clients on growth, customer and digital strategy. You can find more from her on LinkedIn.

    Back To Top