Customer Retention: Types and Examples

Customer Retention

                  Customer retention refers to the activities and actions companies and organizations take to reduce the number of customer defections. The goal of customer retention programs is to help companies retain as many customers as possible, often through customer loyalty and brand loyalty initiatives. It is important to remember that customer retention begins with the first contact a customer has with a company and continues throughout the entire lifetime of the relationship. Companies that shift their focus to customer retention often find it to be a more efficient process because they are marketing to customers who already have expressed an interest in the products and are engaged with the brand, making it easier to capitalize on their experiences with the company. In fact, retention is a more sustainable business model that is a key to sustainable growth.

                   Customer migration refers to the shifting of customers from one segment to the other. A Customer Segment or a group of individuals is formed that allows the company to identify and reach out to customers (current or potential) with similar needs and expectations from the product or service. To measure and analyse the migration patterns, a number of strategies can be followed. It can start either by deciding segments and dividing the population in those buckets according to their behaviour patterns at the beginning and end of the period to measure the displacement. Example: Loyalists, Under performs, Seasonal, Onetime and two-time buyers and Inactive buyers. Another approach is to form a group of people with shared interests and purchase patterns as one segment, and later analyse their movements and migration after the end of the period. One of the best ways to understand customer behaviour is to study customer migration patterns—to learn when and why a customer ends up in a segment different from the one he or she had been in. The starting point for those studies is your customer-segmentation model. After you decide which approach to use to measure migration, the process is a virtuous circle of analyse, segment, campaign, and analyse again. The next task, requiring strong analysis skills, is to tie the observed migrations to company activities, such as a marketing stream, and to customer purchase behaviour. The final task is to apply the results of that analysis to your marketing campaigns to generate revenue and boost customer retention. Customer retention measures not only how successful a company is at acquiring new customers but also how successful they are at satisfying existing customers. It also increases ROI, boosts loyalty, and brings in new customers. It’s also easier and more cost-effective to retain customers than to acquire new ones, returning customers spend more and buy more often, and refer friends and family. Only a 5% increase in customer retention can increase company revenue by 25-95%. There are a few reasons why customer retention is critical to company growth and success:

Affordability: It’s 6 to 7 times more expensive to acquire a new customer than it is to retain an existing customer.

ROI: A 5% increase in customer retention can increase company revenue by 25-95%.

Loyalty: Retained customers buy more often and spend more than newer customers. They’ve learned the value of a product or service and keep coming back, again and again.

Referrals: Satisfied, loyal customers are more likely to sing a company’s praises and refer their friends and family — bringing in new customers, free of charge.

It might seem obvious — of course, companies should want to retain customers — but when companies start growing quickly and struggle to implement a solid customer support program, proactive customer support for existing customers can slip through the cracks.

The top 3 keys to customer retention are described below

1. Shared Vision and Strategy

To achieve their goals, businesses have to know what those goals are in the first place.

Take the time to set a shared vision and strategy with your clients; the idea is to articulate what they are trying to achieve and what the best way is to get there. You want to get your customers thinking about how using your product fits into their core vision, corporate strategy, and program objectives.

That process should start during the sales process and it should continue through the engagement by the customer success team:

By the time customers are fully on boarded, you should have a good idea of their high-level strategic goals: for example, how to augment outbound marketing efforts with an inbound strategy to increase Marketing’s contribution to revenue.

The next step is to highlight tactical objective, such as ramping up the inbound marketing team, deploying campaign infrastructure, or launching the first inbound campaign in Q4.

Finally, make sure to document the exact metrics and goals your customer will use to measure success. If the goal is to generate 250 leads in Q4 resulting in 50 Sales-qualified leads (SQLs), your team should be on the same page.

These conversations should be revisited every quarter during your quarterly business review (QBR). The QBR should have a clear focus, and it should present a clear review of the progress from last quarter and the road map for the future.

2. A Focus on Adoption

Adoption is the foundation of any successful implementation, and it should be considered throughout the lifecycle of the customer’s deployment.

To start, your company needs to have clear, measurable visibility into every customer’s adoption of your product or service. Those measures typically take the form of initial adoption metrics, such as the five key steps a new user must take to be successful, as well as ongoing metrics, such as usage patterns that predict customer health and adoption of new features by current users.

In addition, businesses should look at Net Promoter Scores (NPS), support ticket counts, and other qualitative metrics to get a comprehensive hold on what is working and what is not, and use those insights to inform product decisions.

If there is a roadblock somewhere in the onboarding process, you want to know about it and respond as soon as possible.

3. Manager and End-User Value

Data about user behaviour is also critical post-adoption. Understanding your customers’ day-to-day activities allows you to build a product or application that meets their needs. Companies should attempt to build into the product or service visibility into how customers actually use them—not just how it was originally designed to be used. Generally, the two are not the same thing.

Of course, your product designers had ideas in mind when they created the product or its new features, but customers are experts at devising their own use-cases. Make sure you can “see” these new usage patterns and adapt accordingly.That information also enables you to unblock potential barriers that your product team may have inadvertently created.           

   Some of the examples of customer retention are given below:

• Track and analyse churn metrics.

• Implement a customer feedback loop.

• Maintain a customer communication calendar.

• Send a company newsletter.

• Start a customer education program.

• Build trust with your customers.