Bad news: you’ve just finished crunching the numbers for the month and–to your horror–you’ve determined that your customer churn rate is a staggering 3% monthly.
If you don’t reverse the tide of losing customers, your customer retention rate will be 64% annually. This is not good. Nearly 40% of your customers will leave over the course of the year.
Knowing that in every industry the best firms have upwards of a 93% customer retention rate annually, you know that you need to revamp your customer retention strategy–stat.
Why Does Customer Retention Matter?
Simply put, customer retention is a company’s biggest source of profit.
According to one estimate, improving your customer retention rate by 5% increases revenues by at least 25% and may increase them by as much as 95%. Other estimates are similarly confident, suggesting that for every 1% of customers who purchase your product more than once, your revenues will increase by 10%.
The exact percentage of revenue increase per retained customer depends on the segment of customers that you’re the best at retaining. If you can improve the retention rate for the 20% of your customer base which produces 80% of your revenue, you’ll be golden.
But how can you change your customer retention rate without making major changes to your product and suffering through further customer attrition in the meantime?
Try out the tactics in this field guide to customer retention and you’ll be on your way to a lower churn rate and higher revenues by hanging onto more of your best customers.
Customer Retention Tactics
1. Survey Everyone
Before you can start retaining customers, you need information.
To gather information, you need to start surveying all of your customers as frequently as possible. This means that you need to incorporate these surveys into your website and your customer service infrastructure.
But which surveys are the right ones?
The Bain & Company favorite for customer surveys is the Net Promoter Score (NPS). NPS asks how likely your customers are to recommend your company or product to someone else.
Unsurprisingly, customers who are very likely to refer someone else buy 25% more products.
There are other surveys which you can implement, but frequently surveying your customers’ likelihood to refer means that your customer retention efforts will be off to a running start.
2. Track Everything
If you aren’t already tracking information on critical business metrics, now is the time to start.
These metrics include basic metrics like customer satisfaction but also include derived metrics like:
- Customer churn rate
- Customer acquisition rate
- Average customer lifetime value
- Average customer relationship duration
- Average number of customer interactions with the company
- Average number of customer interactions with support
Your company probably has this data, so crunch the numbers and gain valuable insights into your customer base.
Tracking everything also includes tracking where customers are clicking on your website as well as where they’re lingering after clicking. All customer interactions with your website should be recorded so that you can easily tell which areas are drawing the most attention.
3. Automate Everything
Automating your customers’ interactions with your company will lead to an improvedexperience, which will lead to them being more satisfied–and thus more likely to buy from your company in the future.
A 2015 study found that automated customer service was 60% correlated with customer perceptions of convenience, which was highly correlated with their satisfaction.
The study also states that automated customer service systems increased customer retention.Customer perceptions about customizability were greater with automated systems.
In a different case study discussing Solvvy’s partnership with TaskRabbit, AI-based customer service allowed for faster issue resolution, a 28% self-service resolution rate, and resulted in 8% higher customer satisfaction.
Retaining customers via automation gives your customers the power to resolve their issues without the additional friction and time commitment of speaking with a customer support representative.
4. Segment Your Customers
Segmenting your customers will help to determine which customers are the most likely to leave, and which customers are the most likely to stay. Like customer service, you can automate market segmentation.
When looking at segments of your customers, the aim is to find which features of your product are the most important to the segments that buy from you most frequently. Then, you can adjust your customer retention strategy for that segment.
5. Show You’re A Credible Source
Your customers aren’t going to give your product a chance if they don’t feel like you understand their needs. Likewise, your company needs to display your understanding of your product and its issues.
To be a credible and trustworthy source, you need to show your customers that you are an expert when it comes to the problems that they’re trying to solve by buying from you.
The first step to displaying your expertise is to populate your website with a knowledge base and blog regarding your company and your product.
Having a reputation for credibility by giving your customers access to a strong knowledge base empowers your customers. A study by Loudhouse shows that 53% of customers would rather resolve their own issues, and 27% of customers turn toward self-help portals on company websites in an attempt to do so.
Showing off a strong knowledge base means that customers can trust you to help them help themselves when they have an issue. The self-help portal on your website needs to be organized so that the most common issues have their solutions at the forefront.
When customers believe you are an expert when it comes to your product and also an expert in the way your product gets used, they’re more likely to be loyal.
6. Use Social Proofs And Signals
The bandwagon effect is real, and it can help you retain customers if you utilize it correctly.
People like to buy things that their friends buy, and they trust the brands that their friends trust.
To better retain customers, you need to show off the good relationship that you have with other current customers.
Featuring testimonials from current customers on your website and offering other examples of satisfied customers who have used your product is easy to implement and effective at creating social proof.
If you have been neglecting your social media channels, it’s time to fire them up again. Social media channels are a great way to deliver the social signal of reciprocity. When one of your customers follows you or likes one of your posts, do the same for them and leave a comment.
Respectful exchanges show that you’re paying attention to the customer, and their contacts on social media will see that, too. Customers are more satisfied when they get more attention.
7. Calibrate Customer Expectations
If your customer’s expectations are a mismatch for your actual product, your customer retention rate will suffer.
As a result, you need to get ahead of your customer’s expectations and make sure that they are formed correctly. In practice, this means:
- Producing accurate marketing material that accurately conveys your product’s effectiveness
- Discussing expectations explicitly with customers before making a sale
- Checking in with customers to make sure that they’re getting what they expected
When you set the bar for what to expect, your customers will be pleased when you exceed the standard, which leads to more satisfaction and customer retention.
8. Build Strong Relationships
Strong relationships are critical to customer retention, and the strongest customer relationships are forged by positive interactions during sales and service.
According to a study published by Columbia University, 91% of customers of Toyota who had both a positive sales experience and a positive service experience intended to buy from Toyota again. But the customer retention value of sales interactions is not equal to the customer retention value of service interactions.
The study found that positive service experiences were more valuable to customer intent to buy again than positive sales experiences. Positive sales experiences only increased their intent to buy by 8%, whereas positive service experiences increased their intent to buy by 42%.
Focus your efforts on building strong relationships with your customers by improving your customer service. With effective customer service, your customers will be satisfied and feel a stronger connection to your company.
Start reaching out to customers after a sale or after a service call to see how they are doing and if they are enjoying their experience.
9. Personalize Your Customer Service
Strong customer relationships are personalized customer relationships, and the only way to personalize customer relationships is to know your customers as individuals.
In a Teradata case study, 47% of marketers agreed that personalization improved customer experiences and customer satisfaction. The study also found that 51% of companies are focused on personalizing the customer lifecycle. Companies are incorporating personalization as a way to retain their customers.
Sending out emails to customers with details specific to their recent customer service interaction is one common tactic to increase personalization you can implement immediately.
Aside from tailoring your emails to your customers, suggesting product features to your customer that they may find helpful is another way to personalize service.
10. Listen To Your Customers
Listening to your customers means giving your customers a sounding platform where they can complain to you or compliment you.
Your website should have a place where customers can send suggestions, and your customer service system should survey customers to see what they think.
It’s not enough to just wait around for your customers to talk to you before you start listening to them, however. You need to proactively solicit your customers for their thoughts.
Reach out to customers and ask them about their customer experience so far.
Start the dialogue by focusing the conversation on a recent interaction that the customer had with your company, then let the customer do the talking.
But remember: Listening is more than a data-gathering activity. It’s a way of building a stronger relationship by building an emotional connection between the customer and your company.
Customers enjoy the feeling of being listened to.
11. Respond To Your Customers Quickly– But Not Too Quickly
Customers are more satisfied when they get a fast response from your customer service. But if your customer service is rushed and seems disorganized, the customer will pick up on it and be dissatisfied.
The above is doubly true when the customer is using a service channel that is typically slower than others, like email. This is where automation is your friend.
When your customer reaches out to you with an issue via email, implement an automated response that confirms their message was received and that your customer service team will get back in touch with them as soon as possible.
12. Rectify Your Mistakes
What if your customer service or your product doesn’t meet a customer’s expectations? You need to make things right with the customer immediately if you want to retain them.
According to a study of customer responses to service failures, rectifying your mistakes in a way that negates dissatisfaction and leads to customer retention requires more than a courteous “we’re sorry.”
Politeness only improved the emotional state of dissatisfied customers by 4.8%.
In instances where customer service made a mistake, customers wanted distributive justice– discounts, perks, or other freebies–which improved their emotional state by as much as 75.6%.
The takeaway is very clear. When you make a mistake, the customer needs to have their issue fixed and then some.
Apologizing and being polite to your customer after making a mistake is still essential. But, if your customer service has data on historical mistakes with customers, reaching out to them with a gift in hand is a good way to restore their trust–especially if it’s unexpected.
13. Communicate With Customers Carefully
Communicating with customers on any occasion is an opportunity to improve customersatisfaction. But there is always a risk of the opposite.
This means that if your company has not yet implemented policies restricting who is allowed to talk to customers, it may be time to do so. While your employees may have good intentions, communications with customers need to be controlled.
Aside from making sure that only a few people in your company can communicate with customers, be sensitive to your customers and choose your words carefully. Use positive communication tactics when talking with customers and you’ll have customers that are more satisfied and will want to maintain their relationships with your company longer.
Ensure that everyone the customer interacts with is on the same page regarding wording and positive communication practices. Make a cheat-sheet for employees to use when talking to customers.
14. Adopt Your Customers’ Values As Your Own
Customers prefer to buy from companies that share their values.
According to a ConeComm global study of customers’ opinions about companies and their customer service, 91% of consumers expect companies to address social and environmental issues which they value. 84% of consumers seek companies who share their values when buying a product.
As an example, if your customers highly value protecting the environment, your company should strive to be environmentally friendly and notify your customers of internal changes that you are making to achieve that goal.
Remember, your customers won’t know about your efforts unless you tell them. Make a section on your website which explains your values and periodically update it as you make progress.
15. Address Issues Before They Hit The Customer
If you know that there is going to be an issue that your customers will face, get in front of it rather than letting your customers stumble over it and come to you for support.
In practical terms, this means tracking the most common issues that your customer service deals with and addressing those issues by changing your product, your website’s knowledge base, or your marketing materials.
If things are going wrong for a large portion of your customer base, you should reach out to the unaffected customers and explain to them that other customers are encountering issues that you’re working hard to fix, and that they should feel free to use your customer service if they encounter the issue.
16. Go Out Of Your Way To Satisfy Customers
Customers will be particularly impressed when your company appears to be exerting a lot of effort on their behalf.
Your customer service needs to be flexible enough to look up answers to customer questions that they don’t know, and figure out solutions for customers with unique issues.
Going out of your way to satisfy customers may be expensive upfront, but it pays off with higher retention.
This also means that when your customers have an issue and reach out for support, you may want to throw them a freebie for their troubles. You should also be consistent about following up with your customers to see if there’s anything else you can help them with.
17. Make Your Customers’ Experience Easier
Your goal should be to make your customer experience as frictionless as possible.
A good way to measure friction is to implement Customer Effort Score (CES) surveys on your website and in your customer service funnel. CES scores help you identify areas in your service or in the use of your product that take a lot of effort for your customers.
You want your customer experience to be effortless, so when you have identified an aspect of your company that customers think requires a lot of effort, consider making it more streamlined.
Customers who have easy experiences are more likely to be satisfied and keep buying from your company.
18. Reward Your Loyal Customers
The capstone in your customer retention strategy should be rewarding your most loyal customers.
When you reward your customers, they get a nice reminder that you value them.
Here are a few ideas for customer rewards:
- Thank you notes
- Small gifts through snail mail
- Access to exclusive features
- A positive mention on your website and social media channels
Take Action To Retain Your Customers
With this guide’s knowledge in hand, you can start implementing your new customer retention strategy with confidence.
Remember to gather as much data as you can. Use that data to find out what your customers care about, and prioritize your most valuable and most loyal customers by building strong relationships.
You can’t do everything at once, but you can take steps to improve customer retention and loyalty. Identify the most import opportunities and execute.
The most important part of customer retention is continuous improvement and with this guide in hand, you’re off to a great start.