Retention refers to the ability to retain your customers and their loyalty over a period of time. The user remains engaged with the product and therefore continues to use it as a service. But what happens when customers start gazing elsewhere or become persuaded to use or try another product? This is where retention strategies come in - the ability to create efficient tactics to reduce customer churn, keep your customers smiling, and to not create excessive pressure on your support team.
What you’ll learn in this article:
- Keeping your customers vs acquiring new ones
- Reduce customer acquisition costs
- Product-Led vs Sales-Led
- Top 4 examples of successful retention strategies
- Why retention and acquisition matter
Keeping Your Customers Vs Acquiring New Ones
The answer is quite simple - retaining existing customers is far more valuable than acquiring new ones. When you retain customers, there are fewer expenditures for your team as well as fewer onboarding costs. Statistics show that customer retention is 25 times less expensive than customer acquisition.. Right now, only 20% of companies focus on customer retention, in comparison with 40% of businesses saying they focus on customer acquisition. When looking at the return on investment surrounding customer retention, it can be difficult to understand why a company would focus most of its budget on acquisition. Let's explore further:
Focus More On Customer Retention To Reduce Customer Acquisition Costs
25% of customers who purchase a product are more than likely to use it again. That’s not a great statistic. If you can get a customer to increase usage or upsell the more likely they are to become a brand champions.. Existing customers are often loyal and tend to recommend products or services to their colleagues.. By focusing on your product and points of engagement, creating a brand champion clearly can reduce your cost of acquisition. This along with tools like NPS (Net Promoter Score) can provide valuable insights to strengthen your customer experience resulting in higher retention and product usage rates.
Be More Product-Led than Sales-Led
Product-led growth involves thinking about how the product itself can benefit customers and solve their problems. Being a product-led company means you focus on building the best solution to fit your client's needs. This doesn’t mean waiting for the product to be perfect and not investing in sales. Think of it more as a philosophy where the mission of the product and its outcomes drives the company's growth. Sales becomes a conduit of feedback and product evolution while of course growing MRR.
Top 4 Examples of Successful Retention Strategies
Below are 4 examples of Retention Strategies that are important to any company at any stage of its growth. Meaning these strategies need to be assessed as the business grows and the product evolves.
1. Optimize Your Onboarding
We’ve seen some wild statistics out there that say 60%+ of customers who sign-up for a product never actually use it. Never. This means that somewhere onboarding has failed to engage the customer to come back and use the product.
Any subscription-based business needs to tap into its own data and customer usage patterns to improve its onboarding experience. It is essential to sustainable customer retention. And, it never ends.
As your product grows with your customer base, you need to dive deeper into onboarding. When we say deeper, we mean - are you focused on your user persona? Do you have regional churn, if so why? What is the key area that you see drop off in the onboarding process? Do you have a self-serve knowledge base to address issues quickly? The list goes on and on, but can only be defined by your product and customer usage patterns.
As you can tell from those examples, onboarding is really about nurturing customers and nurturing, just like in life, never ends.
2. Create Product Flows
Product flows guide customers while educating them on new features and showing them easily accessible knowledge tools to turn them into power users. This is not only a great engagement tool, it’s a form of communication that creates empowerment while reducing customer support tickets.
Plus, product flows are visual, so you can add video, interactive guides and create moments for additional touchpoints that make it feel personal for the user. Combined this creates higher engagement that often reduces churn.
3. Adopt a Digital CSM Mindset
Digital customer success is data-driven in its execution - meaning it hones in on usage data to drive product, retention, and growth initiatives. From that context you can focus on key areas of how and why your customers use your product and build campaigns, drive product growth or provide proactive customer support with this knowledge. In the previous paragraph, we mentioned empowering customers, with digital CSM you are empowering your team. I mean, who doesn’t like that idea?
4. Build A Community
We know that the social aspects of a community can not only keep customers engaged with your product, but also provide insights into how and why customers use it. One of our favorite collaborators, Anika Zubair, has spoken often and seen the value of building communities. After all, her company Insided was recently purchased by Gainsight, so we know it works. It’s the ultimate relationship builder with a product or service and it shows great value in what your company has built. Just remember, this takes time. First, you have to build a great product, then you have to create brand loyalists. From there you have the foundation for a great community.
Why Retention and Acquisition Matter
In the end, retention and acquisition are simply the yin and yang of a SaaS business model. They must co-exist and are equally important. We just believe that focusing on retention makes your acquisition strategy more cost-effective and ideally increases conversion rates. It’s worked for us so far - our churn is on average 0.1% (not striving for perfection folks, ‘cos that is boring).
We made it our DNA - focus on the product, always and I mean always, assess your onboarding and look at the data. Once you have that key information then it's time to get creative. I will leave you with an analogy from my previous life in the food and beverage industry (F&B) that I really think applies here. I used to tell my clients “if you aren’t paying attention to your B then your F’d”. Feel free to steal that for your next meeting, because if you aren’t paying attention to your retention, well, you know the rest.