According to recent research, 80 percent of small and midsize business owners are optimistic about their businesses' performance in 2019. These owners cite a variety of factors behind this optimism, including the strength of their teams as well as the quality of their marketing and sales plans. However, 51 percent point to one major factor: the value of their existing customer base.
Yet most companies focus far more on new customer acquisition than they do on customer retention, a concerning fact given the value of customer retention. Research has shown that improving customer retention by 5 percent can increase profits by 25 to 95 percent. At the same time, customer acquisition costs have gone up by 50 percent over the last five years, making it that much more expensive to get new customers.
For organizations looking to frugally build their bottom line, retention tactics can play a major role. Businesses looking to build out their customer retention efforts should consider at least one of the following three activities. They're cost-effective, informative, and can go a long way to helping you keep your best customers.1. Ask for feedback proactively.
No news is not necessarily good news. Most customers won't tell you if they are dissatisfied with your business. They'll simply stop paying. As a result, taking the first step to ask about a customer's experience with you is an ideal way to gauge their satisfaction.
A frequently used approach is Net Promoter Score (NPS), a single-question survey that probes into a customer's likelihood to recommend your product or service to a friend or colleague. As a widely used tool, NPS lets a business easily benchmark its NPS scores against industry averages. It lets organizations see how they stack up and assess if they have customer satisfaction issues that could result in attrition.
While universally used, NPS can be limiting because it doesn't offer much feedback about a customer's experience. That is why another valuable approach is to ask a small number of high-level questions every 6-12 months to understand customer expectations versus actual experience. Consider these three questions:
What motivated you to look for something like our product or service?
What have you enjoyed about our product or service?
What could we do to offer you a better experience?
Taking the time to ask simple yet well-rounded questions can provide a lot of insight into what customers wanted from your business relative to what they are actually receiving. Any negative gaps between the two measures is a signal that it's time to focus more on retention.2. Track product or service usage.
Do you know when the last time was that a customer used your product or service, or when they last walked through your door? Lack of product usage, or infrequency of usage, can be signals that a customer is likely to quit your business. Measuring the last time a customer used your service and comparing that to the average span between usage can help isolate lapsed customers who you may be at risk of losing.
This is one area where customer relationship management (CRM) tools can be incredibly helpful. Rather than having you manually record and compare this information, these systems can automate tracking and collecting for you. They'll often automatically send email alerts if your customers haven't used your services within a predetermined amount of time, allowing you to proactively reach out and ask why. [View Business.com's reviews and best picks for CRM software.]3. Promote "sticky" product features.
Companies are always excited to talk about their newest products and services. However, new features aren't always the most compelling, nor are they necessarily the features your customers can't live without.
These must-have features or services are frequently called "sticky features." That is, features your customers find so valuable that they'll happily continue using your services even if you make no further improvements. When customers aren't using your sticky features, there's a far higher likelihood that they'll churn.
To determine which features are the stickiest, you can certainly ask directly, or you can track it digitally with tools like Google Analytics' Events Tracking or Matomo. You'll usually find that sticky features are the features that reduce the need for recurring or manual activities, drastically decrease the time associated with regular tasks, or reduce the human error or business risks that come with everyday business responsibilities.
Once you know which features classify as sticky, make sure they're getting used by leveraging product marketing. Create blog posts, shareable collateral and videos that not only show how to use these sticky features but explicitly show the value your customers will get from using them.Never stop with retention tactics.
No matter which approach you choose, the key to a strong retention plan is to never stop. Satisfying customer needs in one year has no bearing on driving customer satisfaction in the subsequent year. Making it an organizational norm to put customer retention front and center will go a long way to delighting customers, keeping them satisfied and making sure they stick with you for the long haul.