Customer retention is both the most powerful and underutilized strategy in the business world. Besides supercharging profits, customer retention leads to so many more benefits and opportunities that new clients just can’t give you. Here’s everything you need to know about this strategy and how to start using it ASAP!
How to escape the customer churn cycle
When everything is business as usual, figuring out why your customer churn rate keeps increasing is not an easy task. As you may already know, a lower churn rate means a higher customer retention rate. And the higher your customer retention rate is, the more successful your company will be.
The good news is that most customer churn (up to 85% of it) is absolutely within your control. All it takes is a deeper understanding of how to improve your daily customer service and project management practices.
The thing is, customers leave for a lot of different reasons, ranging from the personal to the preventable. But experts say the most common reason for customer churn is that your customers don’t believe you actually care about them. In fact, this accounts for 68% of reported customer churn survey data and is only meekly followed by dissatisfaction with a service or product (a mere 14%) and being converted by a competitor (only 9%).
So, all in all, statistics show that making your customers feel valued and taken care of is the number one way to break free from the infinite customer churn loop. But that’s not all a great customer retention rate will get you.
Other benefits of customer retention you can’t afford to ignore
Obviously, revenue is important. But you’d be surprised what other business elements can be improved by a high customer retention rate. And many of those same elements will, in fact, impact your bottom line either directly or indirectly. So even if you’re currently satisfied with your revenue, having your customer retention strategy on point now will provide more consistent and long term benefits. So what is client relations? Here’s what you need to know about customer retention benefits:
- Increasing revenue through customer retention is both easier and more effective. You’re 3.5 times more likely to sell to an existing customer than a new one. In other words, a high customer retention rate should account for the bulk of your profits. Without it, you’ll be working harder instead of smarter.
- Additional customer retention efforts lower the overall cost of doing business. Digital marketing hacks prove that spending only 2% more on customer retention could net you as much as 10% in savings – which means a small investment in this practice goes a long way.
- You’ll win over way more Millennials. As a whole, this generation prizes great customer service and ideological alignment on major social/political movements when choosing who to purchase products or services from. And once they find a brand that offers high-quality customer retention strategies which reflect those must-haves, 80% of Millennials become long term brand clients.
- Customer retention saves you money on marketing and sales outreach. According to most sources on the subject, a strong influx of word of mouth referrals is reportedly a reliable byproduct of great customer retention methods, which means that you won’t need to spend as much on things like social media ads because your clients will do a lot of the advertising for you. Plus, the customers you do acquire through word of mouth will likely spend 200% more than the clients who found you any other way.
- You’ll gain more, higher-quality customer feedback than ever before. Customers who love what you do want to feel like collaborators with your brand, providing opinions and suggestions if given the opportunity. A lot of these ideas might give new, more profitable perspectives on your consumer base. It’ll also have a snowball effect on your customer retention rate – 97% of surveyed consumers said they were more loyal to companies who implemented their feedback.
All in all, customer retention isn’t just about profits (although it definitely helps in that area too). With a good strategy in place, you can expect to see significant departmental improvements companywide. From marketing to sales to client services, focusing on customer retention is a proven method for uniting in-house teams and making them more effective than ever before.
Improve customer retention through customer satisfaction
Happy customers are loyal customers. When it comes to retailer loyalty, 84% of adults in America are content with sticking to the same stores. And even if businesses don’t have a storefront, 82% of consumers were enthusiastic about their commitment to product-brands.
All in all, there’s no denying that customer retention is something both brands and consumers can really get behind. Most companies see customer satisfaction as fickle, ever-changing, and hard to measure. But the truth is, you’ll have to develop your skills in this area if you want the business to improve and build its client base over time.
Let’s start with the basics, shall we? Here’s how to figure out where you stand with your primary customer base using real facts and figures.
Measuring customer retention: the do’s and don'ts
Here’s a dirty secret about customer data: Not all customer retention metrics actually matter. It just depends on what your goal is and which areas affect it the most. But it may not be the ones you think!
Customer retention analytics
Customer retention metrics still require an eagle eye when it comes to putting them into practice. And there are lots of retention analytics to choose from, including prescriptive, predictive, descriptive, diagnostic, and outcome.
Plus, you’ll have to consider which KPIs are the most effective for your purposes. Again, they’re not all created equally. So it may take some trial and error to really nail your analytics recipe (which we’ll get into a bit more later in this article). But in general, you should always start by getting a bird’s eye view of where you’re at before charging forward into a new direction.
How to calculate your rate of retention
It’s simple math that pretty much anyone can do, so don’t worry too much about that part. However, you should concern yourself with the amount and quality of data your business has collected over time. In order to get a proper outlook of your customer retention rate, you need to have basic sales information recorded in a consistent and reliable manner.
And, as you get more detailed in your investigation, you’ll also want to review account details for customers you’ve lost to see details on their projects, calculating billable hours, what workflow was used at the time, and any other information you can learn from advanced reporting features. A holistic approach is the right way to find out what you need to know to improve your customer retention rate.
So, without further ado, here’s how to get started:
- Choose a period of time to analyze. Most companies find success with looking at data from that past quarter. But you can also look at your month-to-month progression or even the past year as a whole.
- Find how many customers you started and ended with. Then find out how many customers you acquired during this period. Because we’re focusing on retention and not acquisition, knowing how much new business you got during this time will help you understand how many customers stayed with you the whole way through.
- Plug your numbers into the formula. (Number of customers at the end of the period) - (Newly acquired customers during the period) / (Number of customers at the beginning of the period) = your customer retention number. Then convert it to an actual rate by multiplying the end result by 100.
- Know how you rank. The average customer retention rate varies from industry to industry, so it’s good to know how you stack up against your competition while still keeping your expectations realistic. Your chosen time period will also factor in. For example, an annual retention rate of 35% (and up) is considered normal for SaaS brands.
- Dig deeper to find actionable insights. Depending on how large your customer base is, you should consider identifying the clients or accounts who stopped working with you during this time period. Once you have your list of names, reach out to representatives and ask them to submit their feedback via surveys, polls, or even just a quick phone conversation.
Getting information directly from the source will help you figure out what went wrong during the relationship and how you can prevent your team from making the same mistakes on the next project. You might even be able to persuade some clients to return once they see how dedicated you are to improving your project and business management!
The caveat: irregular business patterns
Subscription-based companies have it easy – when customers leave, it’s obvious because they’ve either done so by specific request or by choosing not to continue their order. But what about businesses whose repeat customers don’t follow a regular pattern? Examples of this include grocery stores, online makeup retailers, and even B2B event tech rentals.
How are they supposed to record, calculate, and manage their customer retention rate?
It takes a little more elbow grease to figure out your customer retention rate if you’re dealing with irregular buying schedules, but it is totally doable. And this is where having reliable and accurate data really comes into play.
First, you’ll need to comb through and look for patterns. Does your average client make a purchase about every two weeks, several months, or even quarters?
Once you figure that part out, you can more accurately assess your rate. To adjust the formula above, simply choose a time period that encapsulates at least three purchase cycles. Anything less might include an anomaly. But you’re always welcome to add more!
So now you’ve got your numbers, expectations, and research all in check. Armed with this valuable knowledge, you’re ready to get your hands dirty and apply what you’ve learned.
Improving your customer retention rate
How long it takes to improve your customer retention rate is as unique as your customers themselves. Although some businesses see immediate results when they first begin applying their newfound customer retention strategy, yours might take a year or more to see real progress. Although it’s not a guaranteed quick fix, you can almost guarantee that putting in a consistent effort will pay off... eventually. If you’re stuck on how to project your customer retention goals, use the time period you chose to calculate your rate. Use this timeframe to establish some modest future goals. Once you do get everything up and running, expect to see steady growth over the long term.
Subject matter expert, author, and speaker Brian Tracy recently shared some of his own customer retention strategies in this great video:
With these basics in mind, here’s what you’ll need to know to create your own recipe for great customer retention rates.
The perfect customer retention formula
Your customer retention solution is going to be entirely unique to you and your team. It will touch every part of your business structure. From customer service to sales to project management, a good customer retention strategy is performing at its best when the basic principles are woven into the fabric of a business company-wide. And in order to do this, you’ll need to figure out which methods you already use, which ones you’d like to try, and which ones ultimately have the biggest impact on your audience.
22 better ways to manage customer retention strategies you should definitely try
The best customer retention techniques are the ones you come up with through trial, error, and a whole lot of audience feedback. If you don’t have that yet, you can start with some that have already been vetted for you. So here you go!
- Maintain proper allocation of employee resources. A single missed deadline is a threat to time and energy that was slated to go to another client. Not all setbacks are preventable, so make sure you track and explain billable hours to customers so they feel taken care of no matter what.
- Teach employees how to juggle a variety of client processes and requirements. Learning how to manage time and competing priorities are skills anyone can learn. Host workshops, email tips, and provide additional access to educational resources they may need. You can also help your employees by providing them with better business software that helps them manage projects more efficiently.
- Make customer relationships visible to your team every step of the way. In a recent survey, 18% of responders listed lack of visibility into project progress as one of the top three challenges they face in the workplace. And because lack of visibility leads to miscommunication, missed deadlines, and budget mishaps, it’s no wonder why this point is so important for client happiness.
- Translate billable hours into measurable and transparent value for clients. Manual time entry tasks are hard for your employees to consistently keep up with. Not to mention that record-keeping already takes up a lot of time. But creating an automated process that your team can use to record, share, and showcase value to clients will help everyone feel like their time is well spent.
- Develop a system for scaling your business. More business is always better. Unless you don’t have the systems in place to handle it. If your team already struggles to keep up with the demand of your current client base, take another look at how you can make your current projects more streamlined through better communication, visual tools, and automated tasks.
- Ensure that everyone understands their role in the big picture. The Harvard Business Review found that communicating reasons behind operational changes as well as how each person’s position helps achieve the ultimate goal leads to more engaged employees with higher job performance. Higher job performance then translates into higher customer retention, because who wouldn’t want to get better service from a company who provides something they already love?
- Create a simple system for consolidating customer feedback. 21% of project managers believe that this task is a big challenge for them and their team. This is especially true when feedback is coming from more than one source, which is why finding one funnel to process all customer feedback (through spreadsheets, survey, and forms) makes it easier to both review and apply suggested changes.
- Hit deadlines more consistently. Keeping projects on track is the bane of at least 27% of survey respondents’ existences, and it should come as no surprise that it’s an issue for their clients too. Under promising and over delivering should be the goal for every client interaction whether they’ve been with your company for 10 months or 10 years. Consistent, high-quality service always pays off.
- Provide clients with project updates that are visual and easy to understand. Sometimes a line or two in a client email about how great things are going just isn’t enough to put their minds at ease. When you use tools like project management software, you can easily share updates that include an overview of what tasks have been completed and which remaining ones are due.
- Use software that ensures all data is uniform across every system. Another common customer service issue that puts off returning clients is inconsistent (or just plain wrong) information. Using multiple systems at once seems like a good idea at first, but when important data is missing from one or not updated on another, your customers are the ones who suffer.
- Organize time-intensive processes so that they’re more efficient and easier to follow. Develop a workflow for both urgent and nonurgent projects. It helps to make it visual so it can be understood at a glance. When steps are clearly laid out like this, it’s far easier to keep things on schedule and follow up with whoever is responsible for delays when they do come up.
- Work with your team to enforce the protection of sensitive customer information. 27% of professional work management teams agree that data security concerns make it harder to provide great service to customers. And for customer retention, building those client relationships is so important. The best solution? A work management solution paired with user-friendly client collaboration features and supported by industry-leading data security features.
- Prioritize communication with established accounts over new ones. By now we’ve explained why repeat customers are better than new ones. Because they’re both easier to sell to (at a roughly 47-57% higher likelihood than new customers) and more likely to spend a lot more (300% more compared to brand new leads), their emails and messages should always be addressed first.
- Develop unique customer journeys together. For finding new opportunities and increasing customer retention, there’s nothing quite like journey analytics. Use this key data set to identify: which client segments are more likely to churn and why, which common complaints or product service requests are causing churn, and which customer service procedures are a turn off for your key demographics.
- Make sure you and your client are aligned on project scope from the outset. Every great project begins with a great project kickoff, a necessity for both new and old clients alike. Making sure you all are on the same page about the project goals, process, and scope of work from the very beginning will help clear up the majority of questions your client will likely ask later on down the line.
- Continue to improve your project planning skills. Sometimes the answer begins with you. Bookmark your favorite project management resources and review the latest trends, data, and insights on a regular basis.
- Create more accurate timelines. Use Gantt charts when plotting timelines for better, more accurate results. They utilize a critical path analysis that helps you spot potential roadblocks before they even happen so you can adjust accordingly before getting started.
- Decrease employee workload by automating manual tasks for sleeker, more professional client interactions. We’ve already mentioned why automating tasks like time entry is so important. But you can also boost your customer service quality through automated workflows, updates, and more.
- Include key stakeholders every step of the way. Did you know that 97% of companies experience project delays? Some are minor and some are major. But when they come up, you need to be able to effectively communicate the project status, solution, and updated timeline to your clients ASAP.
- Make real-time project data highly accessible for teams and clients. Survey responders recently noted that this was the factor that had the biggest impact on their business. Use a dashboard that combines and displays data that can be understood at-a-glance.
- Identify and fix your most common communication breakdowns. Customer acquisition is just one of many stages in the customer lifecycle – and it’s not even the most important one! Have communication policies in place for both customer retention and ongoing marketing efforts to existing clients if you want to keep them coming back for more.
- Believe in buffer. No matter how much experience you have as a project manager, it can be tough to gauge how much buffer time you’ll need every step of the way. Take the guesswork out of it by using a business management tool that accounts for complex projects with a variety of resources and due dates.
Even if you implement only a handful of these tips, you’ll start to see some improvement in your customer retention over time. Whatever tools, education, or procedure updates you can give to your team to help them provide better customer service will ultimately lead to great rates of retention sooner than later.
Customer retention: lessons to walk away with
For a lot of companies, customer retention has been put on autopilot in the background as new revenue maintained center stage. It’s an expensive mistake to make when you consider all the benefits customer retention provides, especially when you consider how much easier it is. As you continue on your business management journey, keep these key customer retention ideas in mind:
- If you’re stuck in a customer churn cycle, the easiest way to break out is to double down on your customer retention efforts. Resist the impulse to gather new leads and focus on nurturing existing business for maximum effectiveness.
- Customer retention is statistically proven to help boost revenue, reduce business costs, appeal to Millennials, reduce sales and marketing spend, and improve the quality of your customer feedback.
- Customer satisfaction is the foundation of any great customer retention strategy and should be measured using a data-driven analysis of your current practices.
- The perfect customer retention formula will be unique to your business and teams. But without a doubt, it will touch and change every major department.
- Make sure to experiment with a variety of new customer retention strategies to see what works best with your audience. Whether you use the ideas on this list or come up with your own, remember to continuously analyze your progress through captured data, customer surveys, and updated customer retention rate calculations.
Refocus your business efforts to maintain a strong, dedicated fan base. Not only will you achieve more revenue in the long run, you’ll also find that these methods (once implemented) will be much easier and more effective than any new customer acquisition strategy you can think of!
Break the customer churn cycle and start your 2-week Wrike free trial today!