You might think that the path toward business success is paved by attracting new business at every turn. The more customers you can sell to, the more profits you’ll see as a result, right?
Not so fast.You’ll likely see more financial gains from nurturing existing relationships than constantly chasing down new ones.
Keep reading to learn how you can improve your customer retention efforts at every touchpoint—from the initial sign-up to every repeat purchase and glowing review that comes later.
What is Customer Retention?
To define retention, we first need to mention that it’s part of a larger effort known as customer relationship management. This is commonly referred to as CRM--not to be confused with your CRM software.
CRM is a company-wide strategy designed to boost revenue, cut costs and most importantly, ensure that customers have a positive experience with your company.
A big part of that CRM strategy boils down to this idea of customer retention--how can you keep customers from defecting to another solution? Or more importantly, keep them happy with the products and services they receive?
Customer retention is a term that refers to a company’s ability to retain its customers over a period of time. Done right, an established customer retention strategy can help you do the following:
- Drive repeat purchases
- Increase your network of brand advocates
- Boost customer lifetime value.
You can calculate retention rate using this relatively simple equation.
1. Look at the total number of customers you have at the end of a certain period (a month, a quarter, a year).
2. Then look at how many new customers you’ve acquired during that same time frame and subtract new customers from total customers.
3. Divide by the number of customers you had at the beginning of that time frame.
4. Multiply that number by 100 and that’s your retention rate.
Why is Retention the Secret to Maximizing ROI?
To explain this in an unscientific way, retention is so valuable because it’s a lot less work to re-engage an existing customer than keep bringing new ones into the fold. The best customer retention strategies enable you to form lasting relationships with your audience, which can lead to more purchases, a higher lifetime value, and an increase in referrals.
Because it can be quite expensive to attract new customers--both as far as time and ad spend are concerned--the focus on laying the groundwork for high lifetime value becomes an important factor in determining whether or not your business will be successful.
According to The Harvard Business Review, acquisition is between 5-25% more expensive than retaining existing customers. Yes, that is a rather broad range, but that number spans several industries, hence the variation.
Here’s another whopper from HBR, increasing customer retention by 5% can increase company revenue by 25-95%.
According to American Express, and backed up by our experience here at Bonjoro, satisfied, loyal customers are more likely to tell everyone they know about their great experience. This brings in new customers without all the ad spend.
And, of course, there’s this one, represented by this nifty little graphic:
Customer Success General Best Practices
Regardless of industry or company size, there are some things that all customer experience pros should be doing to keep customers happy, informed and invested in your brand.
According to HelpScout, the following areas had the greatest impact on whether a customer decided to purchase a product again or recommend it to a friend.
Here are a few basics to bring into your strategy no matter what you’ve got planned:
Treat Your Clients Like the Individuals They Are
If you’ve looked at the Bonjoro website at any point, you already know this. We’re big on personalization around these parts. Personalization makes us feel good--and now, brands are able to scale one-on-one conversations and offer custom recommendations thanks to recent technological advances.
According to Segment’s 2017 State of Personalization report, only 22% of customers are satisfied with the level of personalization they currently receive from brands and 71% of customers admitted feeling some frustration when a shopping experience was impersonal.
Share Knowledge with Your Users
Some products are more complex than others. We’ve worked with a lot of SaaS customers, as well as those in the professional services space, and these types of businesses need to demonstrate expertise and communicate complex topics in a way that’s accessible and easy to grasp.
Whether you’re about to close a deal or you’re just getting acquainted with a new client, take this opportunity to share information that can build trust and confidence in your ability to help them reach their goals.
Explaining to your client what you did, why you did it, and how you came to your decision will help them feel knowledgeable and in-the-loop.
One way you can do this is by running live onboarding demos or creating custom video tutorials that explain your process—as well as how to use features/navigate through your product.
An example of someone doing this well—podcaster/coach Pat Flynn uses Bonjoro to create videos for his clients. Pat says that while it takes a bit more time upfront, adding a personalized video to his onboarding process has been an effective way to get new students active and engaged with his program.
Really Embrace Transparency
To build lasting bonds with your clients, they need to know that they can trust you.
As such, make a point to maintain a culture of openness when it comes to sharing your advice, processes, policies and procedures.
As tempting as it is to say yes to everything a client asks for to avoid the uncomfortable truths, that approach is not the best path toward success.
By sharing your thoughts and opinions with clients, even when it involves telling them something they may not want to hear, you’ll develop a relationship based on trust. Something most clients will see as a positive.
Bringing Customer Retention Strategies to the Entire Funnel
Everyone has an approach to the sales/marketing funnel, but at Bonjoro, we structure it like this:
- Convert—How you nurture leads into customers.
- Activate—How you turn sign-ups into active, engaged customers in the first days or weeks.
- Grow—How you retain those customers and turn them into loyal advocates for your brand.
Each of these moments represents an opportunity for brands to deepen your relationship with a customer. In this next section, we’ll provide you with some strategies that correspond with each of these stages.
Success at the conversion stage depends on turning someone who is already a qualified lead into a bonafide customer.
Lay Out Expectations Early On
Okay, this step may be more relevant to some types of customer relationships than others. In SaaS or high-value sales situations, however, laying out a map of how you expect this relationship to work straight out of the gate is a good way to gauge whether this person will be likely to stick around long term.
Let them know your process regarding things like checking in, how the onboarding process works. Give them a sense of how long it takes you to process an email or expected turn around time for support tickets.
Your customer relationship team should consider this “roadmap” a living document. As the relationship deepens, make sure you’re adding notes to your CRM and discussing new milestones and goals on the horizon.
Show Some (Social) Proof
Testimonials, positive reviews, or proof that a solution is working for others goes a long way in getting someone to finally convert. This example from Crazy Egg leads with a powerful promise--to make your website better.
Then it mentions that 220k people already use their solution, including some of these well-known brands.
Highlight Case Studies
Case studies can show your leads what you can do and the kind of results your efforts have gotten for other customers.
While case studies might not be the casual reading medium of choice for people who have just heard about your brand, they are an effective tool when it comes to showing customers what you can do for them.
Case studies combine the power of social proof--and give “almost customers” a reason why they should pull the trigger. And by the way, it’s long been established in the psychology community that giving people a reason why they should do something gets them to take action.
Activation represents that first moment where the customer experiences your product/service’s core value. Consider activation through the lens of the Jobs to Be Done framework--what this means is, people “hire” products to do jobs for them--if you can identify those jobs, that’s where your core value prop lies. Building on that, activation happens when your customers start using your solution to complete those jobs they were hoping to get done.
Improving the Sign-up Process
Make like Mention and give users a friendly, helpful welcome at first login. What’s great about this example is, they’ve made it clear what an appropriate first action should look like, rather than leaving new users to forge their path.
A custom onboarding process might sound like a lot of work, but it’s a strategy that can set you up for a long-term relationship with the client.
Another thing you'll want to consider in your onboarding process is how you get consumers to the first success that gets them to recognize your product's value.
Make a point of showing your customers the milestones they achieve along the way and frame it not like "here's how to use X feature," but "here's how X feature will help you do Y thing."
Where you can really impress your audience is by tailoring these milestones to specific goals that this person has shared with you.
Don’t Do Too Much At Once
Customer onboarding should be done in stages. As such, it’s important to break up your content into digestible, simplified bytes instead of one textbook you throw at your audience in hopes they’ll get the big picture.
The best way to do this, by offering one lesson at a time. Multiple features? Try making a series of videos or short written chapters that show off what you’ve got to offer.
You might break the process down like this:
- Start with a 'Getting Started Guide'. Include a few basics like log-in credentials and maybe a video introduction. This initial outreach should let customers know that they’ll be receiving a series of tutorials or a welcome package. Give them a breakdown of what they can expect to learn in each lesson.
- Send video (or written) tutorials at a pre-determined set of intervals. Make sure each session comes with a clear way to ask questions or get in touch if the customer runs into trouble.
- Down the road, check in with your audience. Send a newsletter, ask how “everything is going.” Just make sure anything you send adds value to your customers.
- Feature updates. As you develop new features, let customers know. In some cases, this presents an opportunity to upsell or cross-sell new items.
Keep in mind, we’d recommend this strategy primarily to the SaaS set and online educators. If you’re working in e-commerce, your strategy will be more about providing updates on deals, new products and promoting repeat purchases.
At the growing stage, you’ve got customers through a couple of major hoops, the initial conversion and the onboarding and activation stage.
Build Out Your Customer Loyalty Program
Loyalty programs often called customer retention programs are an effective way to increase purchase frequency, as they motivate customers to make more purchases by offering points or rewards.
Things like a user-generated content program, loyalty points, rewards, and gamification techniques are great ways to foster loyalty simply by making customers happy.
Engage Customers with Follow-Ups
According to the Luxury Client Experience Board, every time a customer returns to your website, they are more likely to buy from you again. This study found that after making the initial purchase, a customer has a 27% chance of coming back for a second purchase. If you can keep them interested beyond that point, that’s where the money is. After the third time someone purchases from you, there is a 54% chance of making a purchase.
With that in mind, it’s clear that purchase frequency is going to be the core focus for e-commerce brands.
As such, you’ll need to develop an outbound strategy designed to check in with customers and keep driving that relationship forward.
Emails, of course, present the most obvious way to do this, but you need to make sure that A: your message adds value to the overall experience and B: whatever offer you choose to promote feels personal.
Shopify data from Black Friday and Cyber Monday found that email has the highest conversion rate at 4.29%, followed by search.
If you’d like to give that number something of a boost, consider adding video to your next outreach campaign. Bonjoro videos can be added into an email and provide a more personalized approach to the follow-up message. Top it off with a discount code or some new recommendations to sweeten the deal.
Don’t Forget to Say Thanks
It’s the little things that go a long way. One of our favorite customer examples comes from Munk Store, an e-commerce brand that’s been using Bonjoro to say “thanks” to their customers. From an e-commerce standpoint, this is a prime example of how adding a personal touch to the customer journey can go a long way in fostering a connection from screen to screen.
According to Munk Store’s Andreas Lodahl, adding these video messages to their sales process has resulted in the following increases:
- Open-rate: 50% -> 75.3%
- Click-rate: 19% -> 32.4%
- Review-rate (people leaving reviews on TrustPilot): 10.2% -> 19.4%
Roughly 96% don’t complain when they have a problem, instead, just they quietly walk away without telling you what you did wrong.
Complaints may be tough to hear, but they do give you a way to improve and deliver excellent service. Scan social channels, review sites and your support center for problems and make a point of addressing each bug fix or service issue that emerges.
Make sure that the channels for communication are open, so customers know exactly where to go if they have a problem.
Your existing customers are your best resource. These people already know your brand, so selling to them again (and ideally, again and again) means you’re not shelling out the big bucks on ads or rehashing your sales pitch.
Instead, look back at that HelpScout graphic we posted up top. Customer retention depends on providing a consistently good service, a proactive approach to being helpful, and of course, no unpleasant surprises (bare minimum).
Stop trying to manage customer relationships without a strategy in place. Instead, create a policy that brings in some of the areas we mentioned above. As you perfect your process, you’ll start to see major gains in the way of productivity, profits and ultimately, loyal customers.