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10 Customer Retention Strategies to Implement Today
Len Markidan wrote this on Mar 24, 2015 18 Comments 2,178 Shares Bringing in new customers is hard, but losing them is easy (and costly). That’s why customer retention is critical. Three words. The difference between a business that sustainably grows long-term, and one that flames out and dies, often comes down to just three words. Customer Lifetime Value. Customer lifetime value (CLV) represents the total dollar amount that a customer is worth to your business, taking into account their purchases from the first day they buy from you until their very last transaction. Customer lifetime value is a massively powerful metric, and here’s why: tiny increases in CLV can lead to huge gains in overall revenue. If your SaaS customers pay you $50 per month, and the average customer stays with you for 10 months, then your average CLV is $500. With 1,000 customers, simply increasing that average to 12 months — just 20% — would add $100,000 in revenue to your business.
It’s pretty clear that customer retention — the things your business does to keep your customers from leaving — can pay off in a big way. Below are 10 customer retention strategies that you can start using right away to grow your business:
Keeping Customers Happy As Bill Price, Amazon’s first VP of Global Customer Service, says: “customer satisfaction is everything.” If you can keep your customers happy, you’ll keep your customers. Period.
1) Net Promoter Score Surveys If you want to know whether or not you’re keeping customers happy, you need to track customer satisfaction. At Groove, we do this every three months with Net Promoter Score Surveys, which ask two simple questions:
Results from the first question tell us how many of our customers are promoters (those who respond with a 9 or 10), passives (7 or 8) and detractors (0 to 6) of Groove. Results from the second question tell us why, and most importantly, give us clear direction on what we need to do to increase customer happiness, both for individual customers and across the board for all users.
2) Proactive Support Most customers who have a problem with your product won’t tell you about it. In fact, one study from Lee Resources International suggested that on average for every customer who complains about an issue, there are 26 who don’t say anything; they simply leave. One way to find those issues — and solve them before they turn a customer into a former customer — is with proactive customer support emails sent to customers whose usage appears to be slipping:
3) Customer Service Surprises For happy customers, great customer service needs to be the norm (more on that below), but exceeding expectations is a powerful way to get your customers talking (after all, one American Express survey found that Americans tell an average of nine people about good customer service experiences). To go above and beyond, surprise your customers with small customer appreciation gifts, handwritten notes or even a personal email to say thanks.
4) Reinforce Your Value You work hard to deliver big value for your customers through your products or services. And if you’re doing your job, then your customers should see that. But a small reminder never hurts. Why? It all comes down to a psychological phenomenon called reciprocity. The idea is that if someone does something nice for us, we’ll probably do nice things for them (and vice versa). One study found that when restaurants waiters brought candy when they gave diners their checks, tips went up. And when the waiters came back afterwards with extra candy — delighting the customers — the tips got even bigger. Delight your customers with “candy,” either through surprises like the examples in the section above, or simply by reminding them of the value you deliver. Take the example of Fancy Hands, a personal assistant service that handles everything from making restaurant reservations to calling (and sitting on hold with) your cable company. Every time I log in to my account, I see a clear picture of the value I’ve gotten:
Seeing numbers like that makes me appreciate their service that much more, and makes me a lot more likely to keep doing business with them.
Reducing Customer Effort The Harvard Business Review published some findings which suggest that the single greatest factor in customer loyalty isn’t “WOW’ing the customer” as so many support blogs love to preach. Instead, it’s reducing customer effort. Make life easier for your customers, and they’ll have a great reason to stick around.
5) Onboarding If you’ve ever gone through the sign-up process for a software product and then simply been dumped into the app with no guidance, then you know how frustrating poor onboarding is. It’s estimated that 40-60% of software users will open an app once, and never log in again. How much of that churn is due to poor onboarding depends on your specific product, but there isn’t a business out there that can’t score a few more retention points by optimizing their onboarding. Look at how simple and clear the instructions are in the steps of Slack’s onboarding process:
And once you get started using Slack, the helpfulness continues, even telling you what to expect from outside of the app:
Follow this one simple rule to design an onboarding flow that works: your users should never be left wondering what to do next, or why.
6) Making It Easy to Reach You When a customer wants to get help or ask you a question, they’re already having a less-than-perfect experience. Don’t make it any worse by forcing them to work to figure out how to get in touch. Make it ridiculously easy to reach you, either by prominently displaying instructions for getting in touch, or with a support widget on every page that’ll let the customer get help from anywhere.
7) Customer Education Jay Abraham is one of the most sought-after business consultants in the world. His work has generated billions of dollars in revenue for his clients, and he’s published some of the best books on growth and understanding your customers that you can buy. One of the most valuable takeaways that he teaches is the concept of becoming a trusted advisor to your customers. You must understand and appreciate exactly what your clients need when they do business with you—even if they are unable to articulate that exact result themselves. Once you know what final outcome they need, you lead them to that outcome—you become a trusted adviser who protects them. And they have reason to remain your client for a lifetime. Jay Abraham By being a trusted advisor and educating your customer on how to succeed in whatever field you’re in — for example, if you make help desk software, you might do well to publish a blog and help educate your customers to succeed in customer support — you deliver additional value on top of your product and give them even more reason to continue doing business with you.
Delivering Excellent Customer Service There’s no question about it: customers will do more business with companies who deliver good customer support. In fact, on average, customers will spend 13% more with a company that they feel delivers good support. When we’re talking about lifetime value, that 13% can be a significant win for your business.
8) Make the Customer Feel Cared For There’s a reason that empathy is one of the most important customer service skills: it makes a big difference in the way you approach customer support. Truly understanding your customer’s pain will change your response to it. Look at how Derek Sivers used empathy when building relationships with his customers at CD Baby: If someone would call, saying, “I’d like to talk with someone about selling my music through you,” we’d say, “Sure. I can help. What’s your name? Cool. Got a website? Can I see it? Is that you on the home page there? Very cool. Is that a real Les Paul? Awesome. Here, let me listen to a bit of the music. Nice, I like what you’re doing. Very syncopated. Great groove. Anyway… so… what would you like to know?” I can tell you from my own experience of being a self-promoting musician for 15 years that it’s SO hard to get anyone to listen to your music. So when someone takes even a couple minutes to listen to you, it’s so touching that you remember it for life. Derek Sivers
9) Use the Right Words Words matter a lot, and subtle shifts in language and tone can have a big impact on how your customers hear (or read) what you’re saying. I’ve shared six customer service phrases that you can use to deliver awesome support. Check out that post for more in-depth analysis, but here are the six phrases that I recommend you start using today in your support interactions: Six Essential Customer Service Phrases 1. 2. 3. 4. 5. 6.
“I Don’t Know, but I’ll Find Out for You.” “I’d Be Frustrated Too.” “I’d Be Happy to Help You With This.” “I’ll Send You an Update by [Day or Time].” “I Really Appreciate You Letting Us Know.” “Is There Anything Else I Can Help You With?”
10) Recover Well No matter how hard you try, things will go wrong. It’s a simple fact of life. But how well you recover from screwups — whether they’re fault or not — often determines whether or not that screwup costs you a customer. Anytime something goes wrong, I like to remember The Disney Institute’s brilliant H.E.A.R.D. acronym for customer service recovery: Hear: let the customer tell their entire story without interruption. Sometimes, we just want someone to listen. Empathize: Convey that you deeply understand how the customer feels. Use phrases like “I’d be frustrated, too.” Apologize: As long as it’s sincere, you can’t apologize enough. Even if you didn’t do whatever made them upset, you can still genuinely be apologetic for the way your customer feels (e.g., I’m always sorry that a customer feels upset). Resolve: Resolve the issue quickly, or make sure that your employees are empowered to do so. Don’t be afraid to ask the customer: “what can I do to make this right?” Diagnose: Get to the bottom of why the mistake occurred, without blaming anyone; focus on fixing the process so that it doesn’t happen again.
The Three Pillars of Customer Retention As we’ve covered, there are three keys to customer retention: 1. Keeping Customers Happy 2. Reducing Customer Effort 3. Delivering Excellent Customer Service By using a mix of retention strategies that cover all three of these, you’ll protect your business from churn and turn your customers today into customers for life. Share 2 0 8
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About the Author Len Markidan heads up marketing at Groove. He’s focused on helping startups and small businesses build better relationships with their customers. Read his latest posts or follow him on Twitter You might also like:
5 Customer Service Email Templates for Tough Situations
How to Use Upselling to Increase Customer Happiness, Retention and Revenue.
Six Customer Service Phrases That Will Change the Way You Do Support 18 Comments
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Join the discussion… Fletcher • 3 years ago
Hi Len, Thanks for sharing this. What service do you use to send out your net promoter score? 2
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Len Markidan
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Fletcher • 3 years ago
Thanks Fletcher! We use (and love) Promoter.io: http://www.promoter.io Highly recommend it. 3
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Fletcher
Len Markidan • 3 years ago
Thanks. I've heard good things. 1
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JCCraves
Len Markidan • 8 months ago
Any similar service for a MUCH smaller business? It's just me and right now I want to grow but services like Fancy Hands $30/mo or Promoter $100 are built for larger businesses. I'm looking for something in between everything done by me and paying for a monthly service of those magnitude. • Reply • Share ›
Dale Harrison • 3 years ago
Excellent article! Account retention is a second-class citizen in far too many companies! I've done a great deal of analysis work on account retention for several companies over the years. In addition, I've been in the unique position to analyze 10+ years of detail data from three direct competitors (having held senior roles in all three). All these companies were either SaaS-based or had subscription-like revenue models. Here's a rather more mathematical description of what I found: 1. Account retention always looks like a Poisson Distribution with "end effects" 2. Therefore, account loss look just like radioactive decay with a single highly stable parameter...an "account half-life" or lambda (churn-rate is a derivative parameter) 3. The "lambda" should be calculated and tracked...it's the BEST KPI for defining the quality of your account retention efforts. 4. Lambda is VERY VERY hard for most organizations to move...and often remains highly stable on the scale of a decade or more. 5. Significant improvements in "lambda" ALWAYS requires organizational and internal cultural changes...seldom product changes! That's why most organizations find it very challenging to move the needle in any meaningful way... 6. In addition, there are two "end effects". The "on-boarding losses" and the "die-hards" see more
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Len Markidan
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Dale Harrison • 3 years ago
Wow -- thanks for putting this together, Dale. Really insightful analysis, especially on how crucial focusing on onboarding is for moving the needle on retention. Interesting story, too! • Reply • Share ›
Dale Harrison
Len Markidan • 3 years ago
Thanks! Regarding the onboarding issue. Say you've got a relatively fixed account half-life of say 48 months. Then an account saved at month-1 has a significantly greater compounding effect than a similar account saved at month-30. The internal cost of saving an account is often roughly the same at month 1 vs 30, so focusing on the onboarding process will always give a significantly greater return on your customer support investments... • Reply • Share ›
editweapon • 3 years ago
“I’d be frustrated, too.” is such a brilliant phrase for showing empathy, especially if you mean it when you say it. Thanks for reminding me of the power of that phrase, Len. Btw, I think you want the "one" to be "once" in this phrase: "And one you get started using Slack..." 1
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Len Markidan
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editweapon • 3 years ago
Ah, great catch Patrick, thanks! Fixed :) And agreed: it's a phrase that's far too under-used (and under-felt). 1
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timframed
editweapon • 3 years ago
+1 here, true empathy is a widely accepted as a necessity, but can be difficult to genuinely grasp/convey when you're a representative of your business. Only when you walk a mile in someone's shoes can you really know their pain.
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Viral Khatri • 2 years ago
"Drugs aren't legal but for some Businessmen money is the best drug. Though they don't realise that their only source of drugs, that means their drug dealers, are their clients. Keeping a customer satisfied and wanting to comeback for more should be a primary objective a=of any business, this article is specific to Beauty, Grooming and Wellness Businesses but its got some generic points too which make it an interesting read! http://www.thechairr.com/th...
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Lokesh Tanwar • 2 years ago
Excellent article Len, but I guess you missed the point about Complementary Services or products which we can offer to the clients, not always but some time http://www.businessalligato...
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Mohammad Farooq • 2 years ago
Adequate service where you make yourself reachable to your customers, is a great way to keep them content with your services. Enaging them with regular and personalized offers, is another way to make sure that they remain loyal. Nice article. Here is another link, http://www.simplilearn.com/..., talking about how to do this through social media. Hope, It'll be helpful to all your readers.
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Priya Nair • 2 years ago
Hi Len, Love your point about reminding users of your value! In fact I quoted you and your example of Fancy Hands in my recent post on driving repeat business http://www.marketsideviews.... I explored some interesting alternatives like considering a subscription model among other ideas to grow repeat customers. Do let me know your thoughts on it!
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Justin Butlion • 2 years ago
Great list Len. I think there is so much companies can be doing to improve in this space. I think one of the biggest barriers is the fact that in order to have real impact you often have to do things which are very difficult or impossible to scale. Most companies which reach a certain size dismiss unscalable tactics. I think another important piece of the retention puzzle is understanding who is being retained and to learn from it. I cover this approach and some unscalable tactics in my recent article on customer retention - http://blog.yotpo.com/2015/....
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Fred Quinncy • 3 years ago
Dear Len Thank you for transforming your thoughts and research in the article. Now, the era of tough competition has begun. Every old school rule has been changed and customer service has become the top priority for the survival of a business. As far as proactive customer service is concerned, it is one of the most important points to be pondered upon, I would like to suggest a finest, latest and an exact solution that is adding a live chat software to your website. With it, you can directly engage with the customers in real time and assist them whenever they need help. It always helps to enhance a great customer experience, build customer loyalty and improve sales. There are many surveys conducted in this context and it is proved that proactive live support can improve ROI up to 70%. If this interests you, I would like you to take a look at LiveAdmins.com and get to know about the real benefits.
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Cioaca Virgil • 3 years ago
Awesome list Len. Regarding to 3)Customer Service Surprises, Stripe, Intercom or Wufoo are sending handwritten thank you letters to customers with great success. Based on that, we just started working on a startup that sends handwritten Thank You letters to SaaS customers. It will connect with Stripe or Braintree so you can easily segment the users and send different letters for each segment(like new users on certain plan or 1 year old users). Len, what do you think about this idea? http://www.senddelight.com
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Cioaca Virgil • 3 years ago
Smart idea, Cioaca! I like it.
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