What is customer retention? Why is it important? And how do you do it? Here we’ll provide answers to these key questions. We’ll discuss what customer retention means as a concept, as a strategy and as a metric. We’ll highlight its direct relevance to revenue and its other compelling benefits. And we’ll offer an eight-step path to increasing customer retention by following best practices and leveraging the power of automation. Use these tips to increase your customer retention rate and maximize your repeat business revenue.
What Is Customer Retention?
Customer retention refers to the act and process of keeping customers as loyal repeat buyers who are likely to promote your brand to others. As a concept, in a SaaS context, it represents how successful a company is at getting customers to renew subscriptions or licenses. In other words, the more often your customers renew, the better your customer retention. Customer retention stands in contrast to customer churn, which represents how often your customers fail to renew.
As a strategy, customer retention refers to the actions a company takes to proactively promote higher retention. Finally, as a metric, customer retention rate is a key performance indicator that represents the relationship between how many customers you retain over a given period and your total amount of customers at the beginning of that period. It is the flip side of churn rate, which measures how many customers you lose over a given period.
Why Is Customer Retention Important?
Customer retention matters for multiple reasons. First and foremost, your success at customer retention relates directly to your revenue. The more customers you retain, the more revenue you generate, and vice versa.
Second, tracking your customer retention rate tells you how well you’re succeeding at keeping your customers. This gives you a baseline to evaluate your current performance and set goals for future improvements.
Third, deploying customer retention strategies allows you to proactively increase the number of customers who renew with you. This empowers you to keep more of your current customers as well as transform your customers into enthusiastic promoters of your brand inclined to bring you qualified referrals. All this promotes higher revenue for your business.
Finally, when everyone in your company is focused on retention, you’re not stuck spinning your wheels trying to replace customers and revenue which are churning. Your sales team can focus on truly growing your revenue.
How Can You Increase Customer Retention? Eight Strategies to Keep More Customers
You can systematically increase your customer retention by following some key best practices. These include:
- Mapping your customer journey
- Setting realistic goals with customers
- Improving communication through personalization
- Highlighting your value proposition throughout your customer journey
- Increasing adoption through product education
- Pre-empting escalations with proactive monitoring
- Collecting customer feedback
- Promoting customer loyalty
To maximize your results, combine these strategies with technology tools that automate retention best practices, such as the Totango Spark platform’s Ensure Customer Renewal SuccessBLOC module. Here are some tips on how to put these retention strategies into effect using automated technology.
1. Map Your Customer Journey
The foundation of an effective retention strategy is a customer journey map. This is a visual aid outlining the steps your customer takes as they progress toward renewal and what needs to happen at each stage for optimal results. Steps in the process include onboarding, adoption, support escalation and subscription renewal. Laying out these steps allows you to set goals for each stage, plan what should happen to optimize customer experience, establish automated workflows to achieve desired results and eliminate friction points which can impede customer journeys.
2. Set Realistic Goals with Customers
Customers are more inclined toward retention when they feel that their experience of your product has enabled them to achieve their goals. Articulating realistic customer goals at the beginning of their relationship with you can set customers on a path toward renewal. Use good discovery questions to find out what customers hope to get from using your product. Educate them about what your product can do to make sure their expectations are realistic given available resources. Frame their goals in terms of measurable KPIs and benchmarks, which provides transparency about their objectives and enables you to automatically track their progress. Make goals time-bound to tie them to a concrete schedule and deadline.
3. Improve Communication through Personalization
Personalization allows you to deliver more customized experiences to customers. While personalization is widely used in emails, today’s technology enables you to do much more to customize communications. For example, you can track how well new customers are progressing through the onboarding process, identify customers who are struggling and proactively reach out to assist them through automated messages or live support. You can also segment your customer base to send out personalized communications relevant to the needs of customers who meet specific criteria. For example, customers who are approaching their subscription renewal date can be scheduled to receive a satisfaction survey as part of a check-up process to assess their predisposition to renew.
4. Highlight Your Value Proposition throughout Your Customer Journey
Customers are inclined to renew when they perceive that they’re getting value from your product, especially when it’s a value they could not get at a comparable price from competing brands. Your customer wants to know, “What’s in it for me?” Building reminders of the unique value you deliver throughout their journey can lay the foundation for successful renewal. One concrete way to do this is by providing dashboards and periodic reports which enable customers to see how their key performance indicators reflect their progress toward their goals. Quantify the value customers receive from your brand.
5. Increase Adoption through Product Education
The more customers use your product, the more value they get from it and the more likely they are to renew. Promote more active use of your product by employing adoption best practices. Educate customers how to use product features through tools such as tutorial learning series, best practice tips, and customer use cases. Leverage your knowledge base to make educational resources available to your customers 24/7, 365 days a year. Track adoption rates and reach out to customers who aren’t active users by pointing them toward your educational tools. Totango’s Increase Customer Adoption SuccessBLOC provides automated tools to provide insight into customer adoption and help customers unlock additional value from your product.
6. Pre-empt escalations with Proactive Monitoring
Customers are less likely to renew if they experience frustration using your product and they don’t get the support they need. Pre-empt escalations of support issues by taking proactive steps to intervene before problems become crises. You can do this on the level of the individual customer by setting up support best practices to be triggered automatically when a specific support issue emerges. For example, you can have a tutorial ready to be shared if a customer encounters a common problem using a feature, or you can establish criteria for when a support issue needs to be transferred from automated support to a human agent. You can also apply this at scale by monitoring patterns in support requests and flagging frequent issues for analysis and debugging.
7. Collect Customer Feedback
Regular collection and analysis of customer feedback can help you evaluate whether customers are on a path to retention. You can use a number of tools to automate the process of collecting customer feedback, including:
- Net Promoter Score tracking
- Customer Satisfaction Score (CSAT) tracking
- Customer effort score (CES) tracking
- Automated satisfaction surveys
Set up automated workflows so that when customer feedback indicates a problem, steps are automatically triggered to take corrective action.
8. Promote Customer Loyalty
Retention correlates closely with customer loyalty. You can take steps to promote loyalty, including:
- Providing incentives for repeat business and referrals, such as discounts
- Celebrating customer achievements of milestones, such as anniversaries with your brand or achievements of benchmarks
- Sharing customer success stories to foster a sense of community and model satisfaction
- Offering loyalty rewards programs
Combine these tactics with automation to make promoting loyalty part of your standard workflow. For instance, you can monitor data which reflects customer milestone achievements and schedule automatic actions to be triggered when milestones are met.
Optimize Your Customer Retention to Increase Your Revenue
Customer retention refers to your success at keeping customers, the strategies you use to promote that goal and the metrics you use to evaluate your performance. Your success at customer retention directly affects your revenue by driving repeat business and referrals. You can improve your customer retention through strategies such as optimizing customer journeys, using personalized communication to highlight value, promoting product adoption and proactively reaching out to customers who need help. Tracking customer feedback and rewarding loyalty will further serve to boost retention.
You can optimize your retention strategy by choosing the right technology to implement it. Totango’s Spark platform with its Ensure Customer Renewal SuccessBLOC provides all the tools you need to automate retention best practices, including KPIs to track your important retention metrics and automated workflows and communications to promote renewals. Try it free to experience the benefits of automating your retention strategy.