Customer Churn Got You Down? 4 Tips to Increase Retention
Customer retention earns businesses more money with less spending than customer acquisition. Turns out, people who already know and like you tend to pay you more than people who have never heard of you.
Your odds of making a successful sale to an existing customer are 60 to 70 percent, while your chances of convincing a new prospect to buy are much lower, around 5 to 20 percent. Put simply: You can make more money by keeping good customers than you can by chasing new ones.
Not many companies take that truth to heart, though. Instead, they spend thousands of dollars trying to find and woo strangers, ignoring the people who already know the brand. Companies that neglect their fans for too long inevitably lose those valuable customers to businesses that know how to show a little appreciation.
You can turn your customer retention slump into a major bonus on your bottom line, but before you do, consider why two of the most popular customer retention tactics—which you have probably tried before—almost never work.
Bad Customer Retention Practices in Action
Great retention strategies are about balance, not subversion. Customers know when they’re being misled. Even if you manage to con them into staying on your email list, they won’t view you favorably for making their lives difficult.
Many companies try either hostage holding or surrender tactics to encourage customers on the fence to stay. Neither tactic works well or for long.
In hostage holding, the company forces the customer through a labyrinth of phone trees, customer support teams, unanswered emails, and long hold times to avoid the final goodbye. Maybe that worked in the 1980s, but today, your customers will only deepen their resolve to abandon you as they spend their time on hold tweeting about how awful you are. Not a great plan for a company that values its image.
The other popular bad strategy, surrender, is popular at companies that are too afraid to ask customers to stay. You can almost always do something to salvage a customer relationship, so why let customers click two buttons and leave you without a word? If they really want to cancel, you can make it easy on them without inadvertently blowing off people who just need a little help.
Smart customer retention strategies allow companies to engage active users and prevent people from jumping ship when something goes awry. The best strategies also include a win-back component, in which the company sets the foundation to earn back the business of a departed customer after a separation. By addressing all of these needs in one comprehensive strategy, you can dramatically increase your retention success.
Hostage holding and surrender don’t work, and neither do cheap tactics like discounts and promotions. People don’t want Band-Aids for their issues—they want you to solve their problems effectively. Do that, and they’ll be too busy enjoying your partnership to think about leaving.
Customer Retention Best Practices for 2020
You don’t need a retention gimmick to keep your customers happy. Instead, you need a replicable, effective strategy that keeps people coming back, answers their questions, and addresses their concerns with action. Use these five best practices to boost your retention rates and put more money in your bank account.
1. Reengage with inactive users. Do you track how your customers use your subscriptions and services? If so, you can prevent account cancellations by reaching out to people who may not be getting the most value from your partnership. Send out product updates and special offers when applicable. Ask users to tell you why they drifted away so you can solve the issue with an offering instead of a cancellation.
2. Create a resolution-focused off-boarding experience. So you’ve tried everything, but your customer still wants to leave. Don’t panic—make the process as easy as possible to leave a great impression. Find out exactly why the customer felt the need to cancel, and if you can’t solve the issue in the moment, ask if you can follow up in the future. That customer may not be a fit today, but if you part on good terms, you may win that same person back within the year.
3. Use strategic win-back campaigns. After your customers leave, keep up a steady (but not too frequent) campaign of communications to keep your brand top of mind. Talk about the issues that led your customers to leave and point out what your company is doing to correct them. Someone who left because they didn’t like your limited options may return if you advertise a new product line.
4. Lean on the machines. Machine learning empowers businesses to parse through all their messy data and campaigns to identify which pieces would resonate most strongly with which customers. You can also use machine learning to weed out people who try to game your system. Put as much work as possible on the shoulders of the robots so you can sit back and focus on what you do best.
The next time you hear a common customer complaint, don’t dismiss the other party as a bad fit. Think about what your business could do to please and retain people who just need a little help. As you continue to refine your retention strategy, you will not only lower your customer churn, but you will also strengthen your company’s ability to appeal to your target audience.
Matt Moody is the founder and CEO of Bellwethr, a start-up using machine learning to solve customer retention. Moody is a machine learning engineer who specializes in reinforcement learning, as well as a software developer with two successfully exited start-ups. He and his team are passionate about putting action-based machine learning in the hands of domain experts to move the needle for enterprise businesses.