Bringing in new customers is hard, but losing them is easy (and costly). That’s why customer retention is critical.
The difference between a business that sustainably grows long-term, and one that flames out and dies, often comes down to just three words.
Customer Lifetime Value.
Customer lifetime value (CLV) represents the total dollar amount that a customer is worth to your business, taking into account their purchases from the first day they buy from you until their very last transaction.
Customer lifetime value is a massively powerful metric, and here’s why: tiny increases in CLV can lead to huge gains in overall revenue.
If your SaaS customers pay you $50 per month, and the average customer stays with you for 10 months, then your average CLV is $500.
With 1,000 customers, simply increasing that average to 12 months — just 20% — would add $100,000 in revenue to your business.
It’s pretty clear that customer retention — the things your business does to keep your customers from leaving — can pay off in a big way.
Below are 10 customer retention strategies that you can start using right away to grow your business:
Keeping Customers Happy
As Bill Price, Amazon’s first VP of Global Customer Service, says: “customer satisfaction is everything.”
If you can keep your customers happy, you’ll keep your customers. Period.
1) Net Promoter Score Surveys
If you want to know whether or not you’re keeping customers happy, you need to track customer satisfaction. At Groove, we do this every three months with Net Promoter Score Surveys, which ask two simple questions:
Results from the first question tell us how many of our customers are promoters (those who respond with a 9 or 10), passives (7 or 8) and detractors (0 to 6) of Groove. Results from the second question tell us why, and most importantly, give us clear direction on what we need to do to increase customer happiness, both for individual customers and across the board for all users.
You might also find useful:
2) Proactive Support
Most customers who have a problem with your product won’t tell you about it.
In fact, one study from Lee Resources International suggested that on average for every customer who complains about an issue, there are 26 who don’t say anything; they simply leave.
One way to find those issues — and solve them before they turn a customer into a former customer — is with proactive customer support emails sent to customers whose usage appears to be slipping:
3) Customer Service Surprises
For happy customers, great customer service needs to be the norm (more on that below), but exceeding expectations is a powerful way to get your customers talking (after all, one American Express survey found that Americans tell an average of nine people about good customer service experiences).
4) Reinforce Your Value
You work hard to deliver big value for your customers through your products or services. And if you’re doing your job, then your customers should see that.
But a small reminder never hurts.
It all comes down to a psychological phenomenon called reciprocity. The idea is that if someone does something nice for us, we’ll probably do nice things for them (and vice versa).
One study found that when restaurants waiters brought candy when they gave diners their checks, tips went up.
And when the waiters came back afterwards with extra candy — delighting the customers — the tips got even bigger.
Delight your customers with “candy,” either through surprises like the examples in the section above, or simply by reminding them of the value you deliver.
Take the example of Fancy Hands, a personal assistant service that handles everything from making restaurant reservations to calling (and sitting on hold with) your cable company.
Every time I log in to my account, I see a clear picture of the value I’ve gotten:
Seeing numbers like that makes me appreciate their service that much more, and makes me a lot more likely to keep doing business with them.
Reducing Customer Effort
The Harvard Business Review published some findings which suggest that the single greatest factor in customer loyalty isn’t “WOW’ing the customer” as so many support blogs love to preach. Instead, it’s reducing customer effort.
Make life easier for your customers, and they’ll have a great reason to stick around.
If you’ve ever gone through the sign-up process for a software product and then simply been dumped into the app with no guidance, then you know how frustrating poor onboarding is.
It’s estimated that 40-60% of software users will open an app once, and never log in again.
How much of that churn is due to poor onboarding depends on your specific product, but there isn’t a business out there that can’t score a few more retention points by optimizing their onboarding.
Look at how simple and clear the instructions are in the steps of Slack’s onboarding process:
And once you get started using Slack, the helpfulness continues, even telling you what to expect from outside of the app:
Follow this one simple rule to design an onboarding flow that works: your users should never be left wondering what to do next, or why.
6) Making It Easy to Reach You
When a customer wants to get help or ask you a question, they’re already having a less-than-perfect experience.
Don’t make it any worse by forcing them to work to figure out how to get in touch.
Make it ridiculously easy to reach you, either by prominently displaying instructions for getting in touch, or with a support widget on every page that’ll let the customer get help from anywhere.
7) Customer Education
Jay Abraham is one of the most sought-after business consultants in the world. His work has generated billions of dollars in revenue for his clients, and he’s published some of the best books on growth and understanding your customers that you can buy.
One of the most valuable takeaways that he teaches is the concept of becoming a trusted advisor to your customers.
You must understand and appreciate exactly what your clients need when they do business with you—even if they are unable to articulate that exact result themselves. Once you know what final outcome they need, you lead them to that outcome—you become a trusted adviser who protects them. And they have reason to remain your client for a lifetime.Jay Abraham
By being a trusted advisor and educating your customer on how to succeed in whatever field you’re in — for example, if you make help desk software, you might do well to publish a blog and help educate your customers to succeed in customer support — you deliver additional value on top of your product and give them even more reason to continue doing business with you.
Delivering Excellent Customer Service
There’s no question about it: customers will do more business with companies who deliver good customer support. In fact, on average, customers will spend 13% more with a company that they feel delivers good support. When we’re talking about lifetime value, that 13% can be a significant win for your business.
8) Make the Customer Feel Cared For
There’s a reason that empathy is one of the most important customer service skills: it makes a big difference in the way you approach customer support.
If someone would call, saying, “I’d like to talk with someone about selling my music through you,” we’d say, “Sure. I can help. What’s your name? Cool. Got a website? Can I see it? Is that you on the home page there? Very cool. Is that a real Les Paul? Awesome. Here, let me listen to a bit of the music. Nice, I like what you’re doing. Very syncopated. Great groove. Anyway… so… what would you like to know?”
I can tell you from my own experience of being a self-promoting musician for 15 years that it’s SO hard to get anyone to listen to your music. So when someone takes even a couple minutes to listen to you, it’s so touching that you remember it for life.Derek Sivers
9) Use the Right Words
Words matter a lot, and subtle shifts in language and tone can have a big impact on how your customers hear (or read) what you’re saying.
I’ve shared six customer service phrases that you can use to deliver awesome support. Check out that post for more in-depth analysis, but here are the six phrases that I recommend you start using today in your support interactions:
Six Essential Customer Service Phrases
- “I Don’t Know, but I’ll Find Out for You.”
- “I’d Be Frustrated Too.”
- “I’d Be Happy to Help You With This.”
- “I’ll Send You an Update by [Day or Time].”
- “I Really Appreciate You Letting Us Know.”
- “Is There Anything Else I Can Help You With?”
10) Recover Well
No matter how hard you try, things will go wrong. It’s a simple fact of life.
But how well you recover from screwups — whether they’re fault or not — often determines whether or not that screwup costs you a customer.
Anytime something goes wrong, I like to remember The Disney Institute’s brilliant H.E.A.R.D. acronym for customer service recovery:
- Hear: let the customer tell their entire story without interruption. Sometimes, we just want someone to listen.
- Empathize: Convey that you deeply understand how the customer feels. Use phrases like “I’d be frustrated, too.”
- Apologize: As long as it’s sincere, you can’t apologize enough. Even if you didn’t do whatever made them upset, you can still genuinely be apologetic for the way your customer feels (e.g., I’m always sorry that a customer feels upset).
- Resolve: Resolve the issue quickly, or make sure that your employees are empowered to do so. Don’t be afraid to ask the customer: “what can I do to make this right?”
- Diagnose: Get to the bottom of why the mistake occurred, without blaming anyone; focus on fixing the process so that it doesn’t happen again.
The Three Pillars of Customer Retention
As we’ve covered, there are three keys to customer retention:
- Keeping Customers Happy
- Reducing Customer Effort
- Delivering Excellent Customer Service
By using a mix of retention strategies that cover all three of these, you’ll protect your business from churn and turn your customers today into customers for life.