Winning new customers is critical for growth, but it may not be the most effective way to increase your organization’s revenue. You could see even greater gains by retaining more existing customers and reducing your churn. After all, once you’ve spent all the time and resources to acquire a customer, it’s far less expensive to keep them happy than it is to start from scratch with a fresh prospect.
But don’t take our word for it. McKinsey conducted a study of small, medium, and large companies that were top-quartile performers. Across all three categories, the top performers had lower churn rates than the companies performing in the middle. It stands to reason. Happy customers continue to pay for your products and services, are receptive to upsells, and will refer you to others. Indeed, companies that reduce their churn by as little as 5% can see revenue growth of 25% - 95%, according to HubSpot.
HubSpot's guide has a handy calculator you can download to calculate your retention rate, but it’s easy to do by hand. Let’s say we wanted to find out the rate for the most recent quarter. Take the number of customers you have at the end of the quarter, subtract the number of new customers you acquired during the quarter, and divide the difference by the number of customers you began the quarter with. Multiply that number by 100, and that’s your churn rate.
So, if we had 110 customers at the end of Q1, won 20, and began the quarter with 100, that’s (110-20)/100. That gives us 0.9. Multiply that by 100, and we get a customer retention rate of 90%.
Assuming you’re convinced of the importance of retaining customers to your growth plans, let’s go through some strategies on how you can make sure they stick around.
Measure customer satisfaction
Tools like AI and ML can help you identify at-risk customers, and paying attention to a variety of KPIs — such as retention rates, adoption rates, and attendance at meetings, events, and webinars — can give you a good idea of where you stand in terms of customer retention.
But by far, the most powerful KPI you can measure is your Net Promoter Score (NPS). We have an entire blog post on NPS that goes into much more detail, but here’s the TL/DR version: Ask your customers, “On a scale of zero to 10, how likely are you to recommend us to a friend?”
Promoters give scores of 9-10, while detractors have scores of 0-6. Subtract the percentage of detractors from the percentage of promoters to get your NPS.
By keeping track of your NPS, along with other KPIs, you’ll know which direction customer retention is heading and whether your current efforts to keep them happy are effective.
Build a strong customer-success organization
If one of your top priorities is to retain customers, then it’s a good idea to charge people with the responsibility for ensuring customers see the full value of your products and/or services, Certainly, customer support must be responsive and effective, but a good customer success program won’t just address the problems customers bring to you — they will proactively seek out customer challenges and work to solve them before they ask. So, as you build your program examine the entire customer journey. Do customers have difficulty implementing your solution? Is billing confusing? Are key features going underused?
A strong customer success organization can make an enormous difference in reducing churn.
Become a source of information for your customers. Of course, you need to educate customers on how to get the most out of your solution, but don’t stop there. HubSpot, for example, provides HubSpot Academy, where anyone can access hundreds of online courses from Excel for marketers and advertising on Instagram to the essentials of graphic design, along with plenty of HubSpot-specific training.
Not only will customers appreciate the free training, but they’ll also come to view you as an expert in your field that they can trust. Plus, the content you produce can serve as an excellent marketing tool.
Set appropriate expectations
“Appropriate” is the keyword here. Promise the moon only to deliver green cheese, and you’ll have a whole bunch of unhappy customers. On the other hand, if you underpromise too much, it doesn’t matter how much you overdeliver, customers will soon figure out you’re either sandbagging or not offering enough value in the first place.
Determine what you can reasonably deliver, and then strive to exceed it. Customers appreciate it when they get what they expected, and if you can exceed their expectations from time to time, all the better.
Market to your customers
Marketers often spend so much time working to generate new leads and provide materials to get them across the finish line, that they forget to communicate with the current customer base. If you’re just getting started with customer marketing, newsletters are a great way to start, but as you become more sophisticated, personalize your communications so that they’re tailored to your individual situation and needs.
Say you’re sorry
When your company screws up, apologize and own it. Many leaders see this as showing weakness. If you overdo it, that could be the result. Don’t apologize to a customer that’s being unreasonable. But if you are genuinely at fault, take responsibility and then resolve the issue as quickly as possible. An apology is important, but if it’s not paired with rapid, effective action, it’s useless.
Take some time to develop your own customer retention strategy. After all, you already possess one of the key foundations for fast growth: your current customers. Ensuring their success ensures your own.
Want to go deeper with customer retention strategies? Contact us!