You can build all the fancy acquisition strategies you want, but unless your business provides a product or service that people only ever need to buy exactly once, if you aren’t retaining your customers, what’s the flipping point. It costs five times as much to acquire a new customer as it does to retain an existing one. The probability of selling to an existing customer is 60-70%, while to a new customer it’s only 5-20%. And increasing retention rates from 5% can increase profits by anywhere from 25% to 95%. So dedicating a portion of your efforts towards retention should be an absolute priority for any business.
Anyone who’s ever spent more than five minutes with me will have heard me lamenting that that’s not the case though. Retention is often neglected, or it's ‘covered’ by adhoc email marketing campaigns sent to subscriber lists suffering from constant attrition as the audience disengages from the messages they’re receiving. Honestly, it drives me bananas that such a fundamental part of any business is so often forgotten.
So, continue pouring time and effort into your growth strategies, absolutely, but don’t just leave all that extra money and loyalty on the table, and instead, proactively invest in a retention strategy.
Where to start with a customer retention strategy
Start simple. Don’t be overwhelmed. There is a lot you can do to build a fully fledged retention strategy, but the important thing is to do something. Even with a dedicated resource in place to manage retention, you won’t be able to construct and launch all aspects at once, so it’s important to focus on what’s important for your business. But if we’re going to start somewhere, it may as well be with your existing retention rate.
How to calculate your customer retention rate
In order to accurately measure how well your retention strategy is performing, we need to start by understanding how well you are currently retaining customers. To do this, define a set period of time (the last quarter / year for example) perform the following calculation,
Total number of customers at the end of that period - new customers acquired / customers at the start of the period = customer retention rate
Once we’ve got that benchmark in place we can accurately track the success of our retention strategy.
Next up, let’s start at the beginning. A strong onboarding process for new customers will help them to engage with your brand and leave a lasting impression. This can be as simple as a series of emails welcoming them and letting them know what to expect from your product/service now they’re engaged with you. Or it can be more all encompassing and stretch to triggered emails based on actions they perform, or linking through to further resources on your website or app. The most important part of this process is to get it right. Mistakes in onboarding such as incorrect data, or poorly timed or ill thought out messages, can leave a lasting impression of their own, and negatively affect your businesses reputation in your new customers’ eyes.
Tie this onboarding process into your existing customer journey (if you have one - and if you don’t, now is the time!).
Follow the data
Retention, like acquisition, is never set up and then done. It’s not something you can ever complete. You may have all the constituent parts in place but you’ll need to spend time monitoring and improving them. A big part of that is understanding the data in order to make improvements. If one part of the process isn’t working, why? If it’s an email, is it getting delivered okay, is it being opened (trickier to gauge these days but still an indicator), are recipients clicking through? Keep any eye on performance and adjust accordingly.
But the data you are collecting isn’t just about refinement. You should also be using it to anticipate the needs of your customers. By analysing information you can be more proactive, using real-time data to see where your customers are coming from, what they are buying, how long the sales cycle takes, then applying that information to the retention strategy by sending triggered messages at key events.
Set expectations and stay consistent
Your onboarding process should help to set expectations about the type and frequency of communications you are going to be sending, but it’s important to keep your customers as much in control of this as you can. Whilst an all singing and all dancing preference centre isn’t easy to achieve, giving people the option to control the types of messages they receive helps to reduce fatigue and keep people engaged.
But the important thing here is to do what you say you’re going to do. If you let customers know they can expect a fortnightly email from you, make sure it is sent every two weeks. If you tell them to expect a certain type of communication from you, make sure that is what they are receiving.
Consistency of the message and timing are important, but remember to keep an eye on the data! Even if your messages are exactly what people signed up to receive and delivered like clockwork, if your customers start disengaging then you need to take stock and iterate.
Stop, look and listen
Keep one eye on the data, but also keep an ear out for what your customers are actually saying to you. Get feedback from them wherever it is appropriate to do so in your customer journey. Reviews of products or services, feedback on how they receive your emails, what they say to your customer service reps, account managers, and other employees. Find every avenue your customers have to communicate with you and look at what they are saying. This direct feedback is individually anecdotal, but analysed as a whole can provide some humbling insight into how your business is really perceived.
Watch out for customers saying goodbye
There are often indicators that you’re about to lose a customer; disengaging with your communications, whether email, push or other channels; or daily use of your digital product dropping to weekly. Watch out for these important metrics and build segments and dedicated communications that target these people and try and re-engage them as soon as these signs start to appear.
But don’t be afraid to say goodbye
Ultimately, you’ll never be able to retain everybody, no matter how much you may try. What you can do though is endeavour to leave a lasting positive impression of your product/service. If you notice usage is dropping off, contact them to let them know you’re sorry to see them go, or that you’ll proactively unsubscribe them from marketing communications if it's clear the messages aren’t for them at this time. It's better to be open and supportive than to try to brow beat people into staying with you.