Penny Stock Loyalty and Attrition - dummies

Penny Stock Loyalty and Attrition

By Peter Leeds

The degree to which customers stick with a penny stock company’s products or services is their loyalty. The portion of a company’s market that stops being customers is called the attrition rate.

Picture a penny stock with a million clients. The next year, it only has half that many. That company then has 500,000 loyal customers and also suffers a 50 percent attrition rate.

With any business, you want to see very high customer loyalty and very low attrition. This is even more important with penny stocks; they generally have a smaller customer base to begin with, and their wares are newer and need to survive the test of attrition, which could stand as testament to the acceptance of the customers.

When a company has a very high loyalty rate, it is able to focus on capturing new clients instead of putting resources into changing their offerings in an attempt to hold on to existing customers. A high loyalty rate also lowers a business’s cost of customer acquisition because the easiest individual to sell to is the one you already have.

In businesses with recurring billing, such as those with monthly subscription fees, loyalty is of extreme importance. Any client attrition represents declining revenues, while those who remain loyal ensure the upcoming sales base.

Penny stock customer turnover

One goal for every company is a very low (or nonexistent) customer turnover rate. Any lost business needs to be replaced, and the greater the turnover, the greater the resources required just to break even.

High customer turnover also indicates issues with the penny stock’s products or services. If the users aren’t happy, they will take their business elsewhere.

With penny stocks that are just bringing their wares to market, watch the customer turnover very closely. This number will provide you with insights into product demand and future financial results that the majority of investors do not have.

The best (and possibly only) method to find out the customer turnover details may be to call the companies and ask. They will tell you. Doing so will provide you with information that most other investors don’t have.

You can also keep an eye on press releases, public comments from management, and financial results for clues to client turnover. Generally, when the rate of customer turnover is low, companies will make a point of bringing that news to the attention of investors.

If this aspect of the business is problematic, they may not make any public statements on the topic, which is why the quick phone call can be particularly effective at getting this information.

Relative penny stock order sizes and frequencies

Besides standard customer loyalty, a business should also want its clients to place larger orders and to do so more frequently. By keeping an eye on the average order size and frequency, you can potentially predict which penny stock will be enjoying increased revenues.

A great way to find details about these specific factors is to call the company and ask directly.

Many companies issue press releases announcing significant orders. These may provide direct details about larger or more frequent contracts.