What Is Customer Retention, Where Does It Start, And How Can It Grow Your Business?

Customer Retention
Customer retention

What is customer retention? You know what it is – it’s keeping your customers around, lowering your Churn rate. What you may not know is exactly how customer retention works, and how you can use it to grow your company fast.

If you’re having trouble retaining customers, your marketing efforts are like hauling water in a leaky sieve (but this time, it’s dollars leaking out). Your business is hurting, and if you can’t keep customers around, failure is just around the corner. So let’s clear up some misunderstandings about customer retention and set you on the path to success, shall we?

3 Customer retention myths that will sink your biz

1. Customer retention is a customer service issue

If you’re relying on your customer service department to keep customers around, you’ve already lost the battle. Here’s why: People only contact customer service when there has been a problem. That makes customer service purely reactive, which is not only a tough position for them to be in, but also requires that customers first have a problem with your product or service before coming into direct contact with your business. Sure, if your customer service is stellar, you can keep that customer around for a little longer, but you’re still ignoring the big question: Is that customer finding so much success with your product or service that they wouldn’t want to be without it?

2. Customers will naturally stay with you if they like your company

Recently, we spoke with a CEO who raved about a certain accounting software product but explained “They’re great, but we can’t use them anymore. We’ve outgrown what they can do.” That is the voice of someone who likes a company, loves a product, and is disappointed that his business had outgrown what that product could provide. If that software company had kept better track of his business needs, they might have spotted an opportunity to expand their services and grow their business.

3. With the right marketing strategies, you can retain 100% of your business

We’re not here to sell you a bill of goods – 100% is highly unlikely if not impossible. There are too many variables at play for anyone to guarantee 100% retention. But you can make your product and company so useful that very few people in your target niche would want to do without it. If you help them achieve the successes they’re looking for, you might not achieve 100% retention, but you do have a shot at “negative churn.” Negative churn happens when you maintain the same level of customers, but revenue continues to grow.

4. Introducing a more proactive approach to customer retention

– When retention starts: Customer retention should be a proactive goal with ROI attached to the outcome. And by “proactive,” we mean that your efforts to retain customers should begin at first contact. What does that look like? Think of it this way: Each of your marketing efforts should have the goal to help your prospect find success, by his or her own definition. For example, the wording of the first ad a prospect sees might read: “Would your team like to do more in less time? Click here to start.” Of course, the copy must reflect what your business offers, but focus on the end benefit.

How retention works: While your marketing efforts should help prospects achieve the benefits they’re looking for, there’s a wide gap we need to address between marketing and customer service. Marketing happens before a prospect becomes a buyer. Customer service generally takes over after that buyer already has one foot out of the door. More and more companies are filling this gap with a “Customer Success” team or department.

It’s the customer success team’s job to monitor how current customers use the product (logins, time spent, success markers achieved) and check in to make sure customers showing signs of trouble (few or seldom logins, not really using the product) get support before they think of contacting customer service. By keeping closer contact with your users, your team will be alerted well before they give up and quit, which gives you a chance to solve their problem and win them back by proving your worth. Does this approach require financial backing? Yes. But, it’s much more expensive to win a new client than it is to keep an old one.

Why retention grows:

If you find that your customer retention rates are low, customers are clearly not getting what they need. Instituting a customer success initiative can not only save your contracts but also increase opportunities to up-sell, cross-sell, upgrade and benefit from referrals, reducing your CAC and placing you on the road to Negative Churn.

Every sales person knows that it’s easier to sell to a current, happy customer than it is to make a brand new sale. When you’re retaining customers using “customer success” strategies, you can also have your customer success team offer additional products and upgrades to premium packages. And, as long as the additional product or upgrade suggested truly serves the client’s best interest, the sale should be relatively easy. After all, you’ve already gained their trust.

5. A few customer success strategies to consider

Find the why: The first and best customer success strategy you can employ to retain customers is to learn why they came to you in the first place. What problem did they arrive with? What solution were they hoping to find? You can find out by conducting an entrance survey with clients just signing up. Then use that information to create an experience that meets (and exceeds) their expectations, and most importantly, solves their problem.

How-tos: If the goal of customer success is to help customers use your product to achieve their goals, then that makes instructional content possibly the most useful tool. “How-to” content can be used everywhere from your onboarding process to your FAQ section to your company blog and social media, and every communication should include at least one genuinely helpful tip.

Value-adds: The companies that grow the fastest not only have a great product but also add value along the way. This may take the form of product expansions or companion services, or just providing exclusive content, community forums, tools, webinars, interviews and AMAs with industry experts to your users.

When you set up your business to deliver the experience and the solutions your customers want, customer retention does indeed seem like it just happens naturally. Naturally, but not by accident. Retaining customers is a science. But, once having mastered that science, growth isn’t just possible, it’s nearly inevitable.



Chief Strategy Officer at @Inturact. Moderator at @ProductHunt &@GrowthHackers. Co-Founder [email protected] & @SaaSCommunity. Previously: Growth at @InboundOrg.
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