With businesses across Australia facing a prolonged period of economic uncertainty, retaining existing customer bases has never been more important. Doing so provides a level of short-term certainty and readies a business for growth once conditions improve.
A focus on retention also makes sense from a budgeting perspective as the cost of new customer acquisition has increased by 50 per cent in recent years. Interestingly, after just five years, companies that achieve a 2.5 per cent customer churn rate will be 50 per cent larger than those with a five per cent rate. Retention clearly makes a big difference.
There are six strategies that can help businesses improve their rates of customer retention. They are:
- Encourage high-value actions: A retention strategy should begin as soon as a new customer comes on board. Many products see a noticeable drop in engagement in the first few days, however, those that don’t (like Facebook, Twitter and Pinterest) do so by making sure users complete valuable product actions early on. Making customers feel a connection with your product, service and brand from the outset is vital.
- Watch for warning signs: Once a customer is on board, constantly monitor for signs of a decrease in overall product usage. Are they logging in less than they had before? When they are logging in, are they spending less time inside your product? Look for engagement, not just activity. If a drop-in activity is noticed, proactively communicate with the customer to encourage stronger interactions.
- Regularly communicate ROI: Retention rates can be improved if customers understand the value that your product or service is delivering to their organisation. Monthly emails outlining the benefits derived or savings achieved can help to ensure they remain with you and are not tempted to switch to a competitor.
- Expand usage beyond the “champion”: During a typical sales process, it is traditional for the salesperson to try to find a “champion” in the organisation who is willing to fight through obstacles to adopt a new product or service. While this approach works, it can be risky. Work to develop strong relationships with others across the customer organisation.
- Optimise cancellation flow: Some organisations make cancelling their service a challenging task. While such an approach is not recommended, it’s worth having in place a series of steps that make customers consider fully what they are doing before they depart. A second part of this strategy is to send reminders when payments are late or missed rather than automatically cancelling a membership or subscription. This can help retain a customer who might otherwise have been lost.
- Learn from those who leave: Unfortunately, despite your best efforts, you are still going to lose some customers as churn is a natural by-product of any business. Though it might be painful to think about, ensure you have a well-considered exit ramp. Part of this ramp should involve gathering details about the reasons the customer is churning. This enables you to address any issues and makes sure they leave feeling positive about your company. Consider also creating an electronic survey that is provided to departing customers. People generally like having an opportunity to air their opinions and this provides just that. You can use the results to either try to reclaim churned users or identify cohorts who are especially prone to churn, so you can get proactively discourage it.
By following these strategies, you can be in a much better position to retain customers and maintain a healthy business. Taking steps to improve customer retention rates will ensure your business is healthy and ready for growth once economic conditions improve once more.
Prakash Durgani, Regional Vice President – Asia Pacific and Japan, Segment
