Studies show increasing customer retention by 5% could lead to a 25% to 95% increase in profits. So, why don't we focus more on this crucial metric? Read on for an easy way to improve your customer retention rate.
When acquiring a new customer, subscription-based businesses traditionally set off confetti cannons and shout from the rooftops. But sadly, they've come face-to-face with the pitfalls of this mistaken belief during a long season of crisis.
Subscription-based and SaaS business models have realized that the key indicator of growth and health of your company actually has less to do with customer acquisition and more to do with increasing your customer retention rate.
What is the customer retention rate?
While customer retention essentially is your company’s ability to keep its customers and maintain company-consumer relationships, the customer retention rate is an important metric to be able to measure at the drop of a hat. Typically, this is seen as going hand-in-hand with your customer churn rate. The higher the customer retention rate, the lower the customer churn rate (and vice versa, of course). Without going through the formula, it is simply the remaining customers in a certain timeframe vis a vis new customers.
Why you should be concerned about your customer retention rate
In an economic climate where you can easily acquire new customers, you might wonder why you should bother focusing on this at all. After all, it’s costly and time-consuming to turn your attention from winning over new customers to instead focus on retaining the ones you have. In fact, you may be thinking, “We give our customers high-quality, consistent and FAST customer service. Isn’t that enough?”
Sure, that may have been enough in our previous economy.
The bad news: while a mediocre customer experience used to be an acceptable standard, you are now merely at basecamp now. Customers are expecting more.
The good news: With a few tweaks, you can scale your customer retention rate mountain to match the pros. A focus on improving your customer retention rate is increasingly important if your business is going to survive the current and future climate. Don’t be fooled into thinking once a customer, always a customer.
How to improve your customer retention rate
So, now that you know what customer retention rate is and why you should keep a keen eye on it, how exactly do you go about improving it? Here are 7 proven ways that will help you to keep your best customers, turn them into raving fans and reduce churn rate while you are at it. I’d say that’s a pretty big win!
1. Your best customers should take center stage
Keep data and information about your most loyal customers in a CRM. They don't have to give you their business, but they choose to use your services or product. They could easily go to a competitor, so show them you appreciate them by giving discounts, bonuses (a free piece of content, percentage off next purchase, etc.) other incentives from time to time. Utilize content marketing to spread the word about your new products, bonuses, and discounts. Consider promoting a loyalty program that incentives your customers to talk about your brand.
2. If your customers are king, your products should be queen
For most subscription boxes, the delay in support is usually because there's no one source of truth for products. Since your products are the life and blood of your company, don’t let them languish in unmanageable spreadsheets and Dropbox folders. Too many hours are spent on updating data and, on top of this, some departments are not updated about changes in products. This results in a confused and unmanageable customer support system.
Use a system that sorts all of this, such as a Product Information Management (PIM) tool for your product catalog. One such solution is Plytix, a platform used as the single source of truth for all your product information and assets. Utilize these services to get your information quickly to whoever needs them, whether your sales department or your retention department, so that they can answer concerns and handle issues quickly to your customer’s satisfaction.
3. Understand the WHY behind your customer churn rate
Understanding why people are leaving is key to plugging any holes and gaps in increasing your customer retention rate. You must figure out whether churn is voluntary or involuntary. For voluntary churn, find out why the customers have chosen to leave your business in the first place. One way to do this is through forms and feedback surveys to find out the reasons why they weren't happy with your service. Use the results of the customer feedback to fuel improvements in areas that customers have mentioned.
If you need help in finding the true cost of failed credit card payments and involuntary churn in your business, schedule an easy, no-brainer chat with Gravy to find out what’s actually going on in the back of your business. We'll go through customer retention strategies with you.
4. Your leading churn indicators paint a big picture
The risk points of a customer leaving look different for different businesses.
For instance, it could be that your customer hasn't logged in for a certain amount of time. Your retention strategy should have details about what to look for and what will happen when a customer hits a risk point — in other words, when they wave a red flag. For example, if a customer hasn't logged into your subscription-based business or your membership sites for three months, you can reach out to them and find out what is going on and how you can help them re-engage.
You must also pay close attention to customers who have made complaints. This is a point where they will feel most frustrated and might be looking for other alternatives to your company if the complaint isn't sorted out properly. You need your customer base to love your brand so that they send referrals your way.
5. To chatbot or not?
The resounding answer is, well, YES!
You should make it as easy as possible for your customers to get ahold of you. Customers will not wait 24 or 48 hours to be contacted by email when they have a complaint or a question...and neither should you. Handling customer complaints in real-time is critical. If you don't offer live chat, you’re failing to cater to the needs of over half of your subscriber or membership base. User experience, customer support, and customer satisfaction are super important to your bottom line.
6. The mother of all onboarding
Your journey to improving your customer retention rate can and should start the moment you acquire a customer. Onboarding should be a simple and effective process, clearly explaining how to use your products and highlighting the value at every single turn.
Customers are after quick and painless experiences, and your onboarding should deliver it. Think about using easy-to-read language when sending an onboarding email. The email productivity app, Boomerang found that email messages written at the reading level of a third-grader had a higher chance (36%) of receiving a response than those written at a college reading level (17%).
7. Utilize a personalized payment recovery
It happens. A customer’s credit card is lost, they expire, or customers move and forget to update their accounts. This results in involuntary churn. Unfortunately, it takes more than a couple of dunning emails and an automated process to recover them. Most recovery emails end up in spam. Period. And for those that reach the proper inbox, customers are more likely to ignore them than act on them.
Personalized contact dramatically increases customer loyalty while reducing the cash you lose to credit card payment failure. And here’s the secret to increasing your retention rates. Companies need retention personnel who are dedicated to improving your customer retention rate, reducing your customer churn rate, and increasing your customer lifetime value.
Of course, not every company can afford to set up its very own retention department. And AI and dunning are more likely to get your customers annoyed than paying. The solution is to outsource these services.
Customers actually want to be retained. Believe it or not, it doesn't take a ton of effort to focus on improving your customer retention rate. Repeat customers will be some of your best customers and will naturally promote your brand using word-of-mouth. It also doesn't take a ton of effort to lose a customer, either.
The sooner you wrap your head around where your retention rate stands and partner with companies like Gravy and Plytix PIM, the sooner you can dramatically increase revenue to your business. (Also, having the right ecommerce tools at your disposal makes all the difference now.)
Even in the midst of the pandemic, your business deserves to thrive. While increasing your customer retention rate won't happen overnight, it absolutely can happen over a significant period of time when you have knowledge and forethought. By keeping the customers you have staying — and paying — longer, your business can achieve the stability it needs for growth in the weeks to come.