Successful Customer Retention Strategies That Build ROI
When planning your annual goals and strategy, how much focus do you put on customer retention? As sales experts, it is easy to fall into an acquisition heavy strategy, but is that the best economic decision for long term rewards? According to Harvard Business Review, research done by Frederic Reichheld of Bain & Company (the inventor of Net Promoter Score) shows that increasing customer retention rates by 5% increases profits by 25% – 95% based on your industry. This is why retention is one of – if not, the single most important – “skill” for any service provider to master.
Retention, like any skill, requires practice. It requires effort. And most of all, it requires being highly intentional. A robust strategy with multiple penetration points can help to maintain an open dialogue with your customers, instills trust in your brand, and enables you to deliver a unique and valuable service. All organizations, no matter the industry, must take a discerning look at their current processes in order to ensure they are delivering a highly personalized and exceptional customer experience. All of these tactics can be covered with a solid customer retention plan.
Let’s take a look at six customer retention strategies proven to be successful in building ROI for our customers: Gather Customer Feedback; Maintain Open Communication; Build Trust; Customer Education; Offer a Unique Service; Grow a Customer Retention Program.
Gather Customer Feedback
Having a comprehensive understanding of your customer experience is essential for maintaining strong customer retention. This is why we, and Harvard Business Review, often recommend implementing Net Promoter Score (NPS) to gather customer feedback. NPS is a single question survey which measures customer loyalty by asking how likely the customer is to refer your business/service on a scale of 0-10. A score of 0-6 ranks the customer as “Detractors”, these customers are considered to be actively seeking another solution and could potentially speak ill of your brand. A score of 7-8 is considered to be “Passive” a neutral score but it is assumed they would leave your brand if “conditions” (price, circumstance etc.) were enticing, and a 9-10 is a “Promoter” or loyal enthusiast who will continue to buy and refer others. The NPS formula is calculated by subtracting the percentage of detractors from the percentage of promoters. The results are projected on a scale ranging from -100 to +100 and businesses from all industries land all over the scale. The results of this survey give insight into how you are performing and the projection of growth for your business.
A survey like NPS or another form of user testing can open up opportunities to reach out to those who gave you a low score or negative feedback and ask what you could do better. It also gives you the opportunity to show your customers you listen to their feedback, care about their experience, and strive to give them the best service possible by taking action. For instance, a promoter might receive a personalized message from your head of marketing letting them know that you appreciate the feedback and would love if they could participate in a testimonial. On the other hand, a detractor may get a phone call from the CEO asking what exactly it is they could do better and showing how you are improving. Passives could be flagged internally, and a customer service leader could proactively reach out to build a closer relationship with said customer; the “passives” are on the fence, your actions (or lack thereof) determine if they grow into promoters or fall back to detractors.
Another way to receive high quality feedback is to hire an unbiased third party, such as Cosgrove Partners, to call on customers and conduct Voice of the Customer interviews. This gives you the opportunity to tailor specific questions that get below the surface as to what your customers care about and why – what type of service brings value to their business, and what can you do to meet those needs? Research like this is often valuable when augmented with NPS data-one providing quantitative feedback, the other more qualitative.
Both of these tactics are strong examples of ways to build your customer retention strategy. Customer feedback is the only way to find trends that can enhance your customer experience. Use the data you find to celebrate the good feedback with your team and address the negative in order to constantly improve.
Consider this: just like every other relationship in your life, the ones that last and thrive are the ones you pour attention into. Being intentional goes a long way. There are many ways to do this; both grand gestures and small efforts make a difference. If you are a commercial laundry, customer retention through relationships leverages one of the strengths you carry innately, that being customer intimacy. While large national companies have scale and pricing advantages, family-owned businesses and regional operators have innately more intimate relationships with customers. You know them differently. They recognize names and faces of your key employees; they can set their watch by your routemen’s arrival each week.
You are memorable. Using this to your advantage is a fantastic (and profitable) strategy when it comes to retaining these customers for years to come.
For example, one of Cosgrove Partners’ clients has an outstanding customer retention rate of 98%. How do they accomplish this? Effort and intentionality. They host picnics and barbecues for key customers, which also provides an opportunity for facility tours of the plant. They have even been known to tow a large grill over state lines to host a cook-out with customers at their locations. This provides great face-time for employees with valued customer contacts and is a true act of service and appreciation for their loyalty.
While those gestures are invaluable, the scalability of an effort like that does not reach every single customer. Fortunately, other outreach efforts do not always require a large budget or time investment. Basic acts of customer service go a long way as well. Making sure your team keeps good notes, and checking in with customers every few months is a simple and free way to keep a relationship active. This helps with your record-keeping but, even more than that, remembering when a customer’s daughter graduates from high school or celebrating a business’ 10th anniversary personalizes you and your brand. Putting it bluntly, it is much harder to end a relationship with a vendor that has celebrated your personal accomplishments with you.
Basic acts of customer service that display a genuine and selfless interest in your customer’s business or personal life solidifies your relationship. Thank-you cards, creating customer spotlights, or being transparent about upcoming changes with their account are all simple efforts that continue to establish trust and build the foundation for great customer relationships.
It is important to keep in mind that with many customers, trust has to be earned over time through consistency and reliability. Their willingness to sign a contract or engage with your services is just the first step. Building true trust and accountability takes time and it starts with having a deep knowledge and understanding of your organization’s core values.
Once you share your core values with your customer, it is absolutely vital that they are acted upon and you follow through. Holding true to your values and your commitments keeps you accountable and automatically builds that trust bond between you and your customer. If a customer trusts you, they are that much more likely to renew and be a customer for life.
Another important component to building trust is owning up to your mistakes. Humility and integrity go a long way when it comes to the longevity of a business, and it is evident to those who are closest to you – your customers.
Customer education builds customer retention by showing your customer base you are invested in the success of their business. Especially if you can find a way to offer your customers free training or similar need on specialty services in your industry. Research regulatory and compliance topics that impact the industries that you serve, in an increasingly regulated world, being the expert that a customer turns to in a time of confusion can make you an invaluable partner. Find expert leaders in your organization who are great teachers. You may find that your customers depend on your continuing education program to stand alone in the marketplace, and therefore continue to work with you, and refer you to others year after year.
Showing you are the industry expert through education programs and trainings builds trust between your customer and your brand. Developing a program to showcase that expertise will not only help retain customers but create raving fans.
Offer a Unique Service
Often times our customers find themselves competing in highly commoditized industries, and therefore the ability to differentiate what they offer to their customers is particularly challenging. It is our philosophy that in order to properly defend your offering from that of a competitor you must know yourself, your competitors and your customers on an intimate level. Only then can you position yourself (or business) as uniquely qualified to meet your customer’s needs. Perform a competitive SWOT analysis to break down where your strengths and weaknesses lie compared to your competitors. Information that is gathered during a SWOT allows for you to clearly identify what “differentiates” your solution from that of a competitors. We use the phrase “defensible differentiation” which means that a differentiator is only valuable if you can defend it–you have to prove how you are different. Differentiation is in the details and you must gather proof points, data, and facts to validate any claimed differentiators. You can read more about how we define differentiators in this blog post.
Despite popular belief, “price” is actually not the main motivator for the decision for a customer to choose or not choose your business or solution. Price is simply the lowest common denominator for businesses that have failed to effectively differentiate their solution from that of a competitor. Comparing apples to apples comes down to price, comparing an apple to a Mercedes is completely different.
This strategy doesn’t end with discovery. Action must be taken on the findings by communicating these offerings and differentiators. If a customer does not see how your offering is different, they will choose the vendor with the lowest price. In order to make that distinction, they must understand how the difference of your offering creates value for them. We call these value drivers. If your customers view you as an expert and someone who understands their key business issues, you have an opportunity to influence their decision in a meaningful way.
Grow a Customer Retention Program
Technically, any of the already stated strategies above could be different facets of your greater customer retention program. But there are countless established methods that you can take on as a customer retention program if they fit the needs of your business model.
A customer retention loyalty program incentivizes the buyer to continually purchase or renew. Take an airline, for example, loyalty programs that give flyer miles, perks and flying advantages if you spend with them over other airlines are highly motivating.
Other programs could include a customer round table or advisory board. Show the buyer you value their expertise and feedback and in turn you receive their loyalty. Another program we have helped clients implement is a quarterly scorecard, a report presented to customers on a regular basis that scores your performance where it matters to them, so that they can see where you are succeeding, if and where you are underperforming, and what you are doing to improve. This effort helps to keep you and the value you create top of mind when a competitor comes in and offers a discount.
Adopting every single strategy to improve your customer retention would be incredibly difficult to scale and in turn be less effective than starting small. However, think about each of these customer retention strategies carefully in relation to your buyer personas and business goals to determine which one or few will be most successful for your business and customer base.
If you have questions about customer retention or other sales and account management training tools, feel free to reach out directly – we’d love to chat with you! firstname.lastname@example.org