Think about the times you’ve returned to your favorite restaurant or bought from an online shop. Why is it that we tend to revisit certain brands? What do they do that earns our loyalty? And how can we use those lessons and apply them to our businesses?
This guide is not about how to attract customers, although we’ve covered this in previous posts. Instead, we want to focus on encouraging repeat business, turning first-time buyers into long-time customers, and cultivating a meaningful relationship with your audience.
But before we delve into any of that, we have to understand the basics of tracking customer retention.
Customer success KPIs
Every business needs a way to measure their efforts. Without key performance indicators (KPI), leaders cannot determine whether their efforts and resources are being put to good use. It’s like navigating a dense forest without a map or compass—it becomes impossible to know where you’re going or how far you have to go.
But what about customer service? How can you measure something so subjective?
For SaaS (Software as a Service) companies, the churn rate is among the most important statistics to track. Churn rate is defined as the percentage of customers or subscribers who either cancel or do not renew their subscriptions within a specific period. If a company is witnessing a high churn rate, that means they are having major issues with customer retention.
Another popular metric is the Net Promoter or Net Promoter Score (NPS), adopted by more than two-thirds of the Fortune 1000. This tool measures brand loyalty and a customer’s willingness to recommend the company’s products and services to others. An NPS score ranges from -100 (detractors, or those with negative remarks about a brand) to +100 (promoters, someone that actively recommends the brand). Despite its overall popularity, NPS has become controversial and is often criticized as inaccurate and inconclusive.
From a more financial standpoint, expansion revenue, also known as Expansion MRR, measures how much revenue comes from existing customers. The higher the expansion MRR, the happier and more loyal customers are. Businesses with higher expansion MRR than new customer MRR would benefit from reinvesting their resources back into upselling, cross-selling, or offering add-ons to existing customer purchases.
To calculate expansion MRR, use the following equation:
Expansion MRR % = (new revenue from upsells and cross-sells in a month) ÷ (revenue you had at the end of the previous month)
The final and most common metric is CSAT, or simply known as customer satisfaction. Since satisfaction varies from person to person, so too does the way brands measure it. For many, customer satisfaction surveys are the most efficient and effective way, with questions such as “How would you rate your overall satisfaction with (our product or service)?” followed by a rating of 1-5, or 1-10.
Either way, every customer retention strategy begins with a few metrics that help you gauge overall progress. Spend ample time in deciding which metrics make the most sense for your industry, your business, and your products and services.
Customer loyalty programs
With your customer loyalty metrics in place, the next step is to start carving out the programs that encourage and incentivize repeat engagement from customers. This can be a grand undertaking, encompassing customer service, loyalty/rewards programs, social media outreach, and much more. But the overall benefits cannot be understated:
– Greater customer retention – “It is 16 times as costly to build a long-term business relationship with a new customer than simply to cultivate the loyalty of an existing customer.” (Annex Cloud)
– More frequent customer referrals – “83% of customers are willing to refer after a positive shopping experience.” (Extole)
– Positive customer reviews – “90% of customers who feel high levels of trust and loyalty are significantly more likely to share ratings” (InMoment)
Customer loyalty starts with listening to your customer’s needs and wants. One important method of doing so is to build a multi-channel customer service system. With this system in place, customers have more options and flexibility in choosing how they interact with your team. For example, if a product they purchased was found to be faulty, they can email, call, or bring it into a local store.
Other brands are finding ways to gamify engagement to incentivize customers. Credit card and foodservice companies use programs to reward customers that repeatedly purchase from their brand. Even learning services such as Khan Academy and Duolingo are finding ways to make learning more addicting with the introduction of achievements and leveling systems.
We could run through thousands of examples of building customer loyalty. But every loyalty program has a single unifying goal: genuine customer delight. That requires going above and beyond their expectations, beyond the first purchase or subscription. How can you continue to add value to your customer experience?
These days a B2C brand cannot survive without having a presence on social media, and they cannot thrive without providing real value through their platforms. So how can one add value on a platform like Facebook or Twitter?
Education through social media
Graphics card maker, Nvidia, posts insightful news articles, such as how their Nvidia Inception program is helping AI startups in monitoring deforestation, thawing permafrost, and natural gas leaks around the world. Toys”R”Us is helping parents and children make thank you signs for essential workers, staying both relevant while maintaining the positivity and creativity of their brand. Others have posted how-to guides, tutorials, informative lists, infographics, and much more.
Brands have also found success in providing customer service through social media. Companies like Seamless are taking advantage of Twitter’s reach and sense of immediacy by using it as a customer service channel. The foodservice brand delivers 24/7 support to anybody that tags their handle in both the United States and the United Kingdom. These days it is not uncommon for companies to spend thousands of dollars on social media listening tools—apps that allow companies to keep track of what customers say about their brand.
Another major tactic involves the use of video marketing. Live streaming has become a popular way to engage with users through video, as it gives a feeling of actually “being there.” For example, BIRCHBOX, a monthly makeup subscription box, collaborated with Benefit Cosmetics to demonstrate a new kind of Mascara through Facebook Live video. The live stream was viewed over 18,000 times. Similarly, Instagram Stories are a relatively new method for brands to pop up at the top of the app. Airbnb hosted a Travel Tuesday series which uses both professional photographs and user-generated content from Instagram, and paired them with simple questions like “Where are we?!”, along with a few options for engaging. To find out the answer, users had to swipe up, leading them to the company website!
Customer relationship management system (CRMs)
We’ve spoken about customer-facing solutions for retention, but what about solutions that benefit your team? CRM software can make the difference between an organized and disorganized company.
For one, a reliable CRM can give off warning signs of customer churn. Mailchimp, for instance, will show you the percentages of people that unsubscribe from your newsletter each month. This can be vital information in determining whether your email marketing is considered valuable or not.
Target profitable customers
Tools like Salesforce allow you to track each user’s interactions and transactions with your brand. Using this data, you can determine which of your customers are the most loyal and have spent the most money. This, in turn, allows your brand to focus on investing outreach towards the most dedicated customers.
Finally, CRM can help with the personalization of a customer journey. A great CRM will be able to break down your customer journey into a series of steps, and then analyze your customer’s purchase decisions along the way. Over time, you will collect enough information that will allow you to create A/B tests or small experiments that help ascertain each of your customers’ personal preferences. From there, you can start to tailor your customer journey to specific niches within your audiences, ultimately creating a more visceral connection with your customer.
Even in 2020, blogs remain a vital part of content strategy. They help to create awareness, inform, educate, share customer stories, and boost SEO efforts. Blogs remain an indispensable aspect of the customer journey. No matter which phase of the journey your customer is in, blogs can attract and convert without the need for advertising.
Whole Foods used to maintain a blog called Whole Story. Instead of just promoting their items in-store, they offer educational material on their products, from the top 10 Vegan Beauty Products to 24 Recipes and Ideas for Polenta. Today, their blog is called Tips, Ideas, and Recipes, where they continue to share helpful guides on making the most out of the food you have on hand.
Build trust and authority
The more a company can demonstrate their knowledge and expertise on a specific topic, the more audiences (and search engines) will view their content as reputable and trustworthy. For example, Zillow Porchlight is the company blog, and it features various tips, guides, and resources on buying, selling, and enhancing your home. Evernote publishes articles centered around productivity, remote work, and writing.
To truly start seeing conversions and engagement from your blogs, make sure to include a relevant call to action (CTA) in some of your posts. Something as simple as “follow us on social media” or “purchase today” can help initiate further customer engagement from a single post. In Grubhub’s blog, 5 Tips and Tricks for Family Meal Planning, they sprinkle in a few links that lead to searches for vegan, pizza, and steak meals. On the right, there’s another call to action to get more deals and recommendations by signing up for a newsletter. From a single post, they’ve found ways to gently nudge the customer further along their journey.
We’ve only listed a handful of customer retention strategies, and there are bound to be countless more. But these represent some of the most effective and most relevant strategies in 2020. How will you use these concepts and tailor them to your own business and brand? How can you provide value to your most loyal customers?