5 Strategies To Increase Customer Retention

Customer retention can make or break your business.

On average, businesses experience 13% annual revenue churn, while the best businesses achieve negative churn. Tech industry expert, Andrew Chen advises that it’s critical to get monthly churn under 5% and the goal should be 1-2%.

The Harvard Business Review shows that improving customer retention by 5% can improve profitability by as much as 95%.

Check out these top five strategies to help you improve customer retention and reduce your churn rate.

1. Have a customer focus

It virtually goes without saying that providing excellent customer support will help you retain your customers.

What’s harder is putting ‘great customer service’ into practice particularly when it comes with the demands of a 24/7 online business.

Make it a priority

Perhaps the most obvious place to start is to make customer support a priority in your business. Customer support can seem tedious and you might at first consider it a support function but, the truth is, great customer service will give you an advantage over your customers, becoming your primary sales tool and the foolproof feedback system you need to make your products or services the best out there. Don’t stand for poor customer service: make it part of your business’ lifeblood!

Involve the whole team

It can be tempting to leave customer support to one person or a small team of people. This can, of course, work well but the best companies treat customer support as a company-wide concern. If you’re a software provider, your engineering team may be in the best position to deliver awesome support.

Paul English, founder of Kayak shares his strategy of planting a big red telephone with an annoyingly loud ringer in the middle of the engineering department. The engineers at first hated the telephone but that was Paul’s point: the faster the team spoke with customers and solved their problems the less likely other customers would experience them again, reducing the number of calls.

Buffer are a Twitter scheduling tool famous for providing world-class support, particularly to customers on their freemium tiers. They do this by getting everyone on the team to answer five support tickets every day.

Make support a function that everyone is responsible for and your customers will love you for it.

Use the right tools

Managing customer support can be half the problem. An effective help desk tool will allow you to manage incoming emails and calls effectively.

There is nothing that looks worse (from a customer’s perspective) than when you lose track of one of their requests. At Vero we use HelpScout to handle incoming support emails. It’s a straight-forward tool that has not only has it helped us get our average response time down to less than five hours (across all timezones) but means we now no longer lose track of our customers’ requests.

Don’t put your support at risk: invest in quality tools.

2. Educate for free

Customers buy from people. They buy based on trust. Building trust with new customers is the key to getting them to buy in the first place and maintaining and strengthening that trust is the key to keeping your customer over the long term and improving customer retention.

Sharing is caring

The best brands give away everything know for free.

37Signals’ Signal vs. Noise was a widely-read blog over a period of five years before they released their first product, Basecamp. 37Signals had built a lot of trust with their readers and clients over this period and this gave them a headstart when they had a product to sell. They now have fanatical fans the world over, thanks to the effort they have put into sharing their journey and secrets so openly. They have even written a book:

Net-a-porter is one of the world’s leading eCommerce brand. They use a weekly ‘magazine’, delivered via email, to share the latest and greatest fashion tips with their female readers. Similarly, Mr Porter spends the majority of it’s marketing effort on free resources including profiles on well-known celebrities or fashion icons, ‘how to dress’ guides or tips on styles that work well together. These are examples of sharing great knowledge to build trust and build a loyal customer base that buys again and again.

This practice can perhaps be best illustrated with the offline example of chefs: celebrity chefs build their careers by giving away their secrets. Jamie Oliver’s hit TV shows and books have made him a household name. Having sold over 126 million pounds worth of books, he’s one of the highest selling author in British history. His willingness to share has built trust with his audience. A trust that has kept them coming back.

Use product updates as a chance to re-engage customers

Whenever you release a new feature or update some major aspect of your products or services, use these changes as a chance to build momentum and impress your customers.

At Vero we send out a ‘Tips’ email approximately once a month with feature updates and tips on how our customers can better use our product.

These emails always get a very positive response and, by sending them to current customers and customers in our free trial, we see a surge in re-engagement. These emails are truly effective: they work because they give our customers a reason to come back and check out our improvements. We are keeping the conversation alive.

Use every channel available

Miishka is a small Australian online retailer run solely by Michelle Glitman. She built a following of over 80,000 followers using a Facebook page in less than two years. Facebook was the lifeblood of her business before she even launched an online store.

Similarly, companies like KISSmetrics use their Twitter feed to constantly provide insightful links to resources that educate their target market. With over 113,000 followers they have accumulated a large and loyal following.

3. Prompt direct action

Sometimes being direct is the best course of action. Using analytics software you can understand exactly where each customer is in their lifecycle with your business and make informed decisions to ensure they stay a customer for as long as possible.

Get in touch with at-risk customers

What does good customer behaviour look like for your business? This could be as simple as tracking how often a good customer logs in or how often they purchase or it could be as complex as using regression analysis to determine the significant factors in a customer’s decision to leave.

Once you know what good behaviour looks like you should setup an automated trigger to get in touch with customers who begin to fall outside of these parameters. At Vero we currently have an internal trigger that fires an email when previously regular customer hasn’t logged in for 10 days.

Alerting your team is easy with Vero’s built in internal notifications based on customer behaviour. Check it out

This gives us the ability to follow up personally and continue our relationship, increasing our retention rates.

Use actions to drive repeat business

Even your good customers may not stick around if they don’t see continued value in your product. This is particularly important for transactional businesses: eCommerce stores, travel sites and game producers for example.

One good way to drive repeat business is to use your customers actions as triggers to generate more business.

‘Product replenishment’ campaigns are a great example of this in practice: if a customer purchases six bottles of wine today then you should use this trigger to send them an email three months later, ask if they enjoyed their purchase and remind them to re-stock.

SaaS businesses can employ similar tactics by sending emails that highlight the value of your product to your customers regularly. Take this great example from Perfect Audience:

…or this one from Qualaroo:

Email is a powerful way to stay in touch and these sorts of emails are perfect examples of how to stay inside your customers’ inboxes and re-enforce the positive value of your business. Vero makes it easy to send emails like this, start a free trial to see these sorts of campaigns in action.

4. Reward loyalty

Once you have loyal customers you should continue to drive them further up the loyalty chain. If a customer loves your business why should they ever buy from someone else?

Introduce a loyalty program

Loyalty programs work. Research from Monash University in 2011 found that members of frequent flyer programs would pay more for tickets if they were assured the tickets would be contributing to their frequent flyer accrual. This shows the power airline loyalty programs have over their active members.

A points system won’t work for every business but the essence of a frequent flyer program is to reward customers that consistently choose a particular provider over it’s competitors. What can you offer your regular customers to give them a true warm and fuzzy feeling.

Take Foursquare. They successfully used a set of loyalty rewards in the form of ‘mayorships’ and their weekly leaderboard to grow to over 25 million users.

Encourage customers to share

Further to loyalty programs, many businesses employ internal referral or affiliate programs to reward customers for sharing. Groupon used their infamous “$10 off your next purchase for each email address you refer” to drive massive growth in 2009 and 2010.

Perhaps most successful of all recent online referral programs is Dropbox’s, which gave referrers and referrals each an extra 500MB space. The program was so effective that customers actually advertised Dropbox on Google AdWords to unlock extra space. If that isn’t a sign of customers who are engaged and demanding more, I don’t know what is.

 

5. Build habits

Arguably the most powerful way to improve customer retention is to build your businesses value into their daily routine. You want to become a habit.

Use hooks to drive repeated interaction

Buffer uses it’s ubiquitous ‘share’ buttons and ‘your buffer is empty’ emails to encourage their customers into the habit of updating their Buffer queue all the time, to ensure it never runs out

LinkedIn has recently implemented an ‘endorsements’ feature that encourages customers to endorse the skills of others in their network. Their endorsement emails regularly keep you engaged with friends and colleagues and encourage reciprocation, getting you in the habit of rating others to build your own profile.

Another great example from LinkedIn is their weekly emails giving you a summary of ‘who viewed your profile’. These emails are becoming a regular habit for heavy LinkedIn users: a means of seeing who is checking them out and a means of garnering new leads for those doing direct sales. This is a great example of a savvy campaign that is re-defining the customer experience with LinkedIn

 

RunKeeper uses push notifications to keep customers engaged and ingrain the concept that ‘You can’t run without tracking on RunKeeper’

It’s clear that product design is important when considering how to hook your customers for the ultimate in customer retention.

What do YOU do?

What methods, exactly, do you use towards customer retention? Do you use email, direct calling or some other tactics? Let us know in the comments!

---

Want to send more personalized mobile and email messages to your users?

Check out Vero, customer engagement software designed for product marketers. Message your users based on what they do (or don't do) in your product.

Learn more about Vero and consider signing up for a free trial. No credit card required.