How to retain the customers you acquire
In the current economic conditions, companies can easily lose focus on the biggest opportunity: retaining current customers. There are strong benefits to be reaped from retaining customers, as it is estimated that a mere 5% increase in customer retention can boost profits by 25% to 95% — depending on the industry.
Retaining existing customers is challenging, but there are practices that successful companies apply across industries to drive customer retention.
01 Having a meaningful offer
Companies that create — and maintain — an offer that is meaningful for their customers, are more likely to retain their customers, because customers will not want to, and ideally not be able to, get their needs met elsewhere.
A product/service offer is meaningful when it is valuable for customers. To add significant value to customers’ lives, brands must understand the problem that customers are looking to solve with the product/service and the real motivations for seeking it out (more about Jobs To Be Done theory here). A meaningful offer also responds to the customers’ context and learns from past usage and customer behaviour.
Successful organisations adapt their products in response to market conditions and changes in customer expectations. Customer expectations are continuously in flux, companies with strong customer retention are great at listening to their current and prospective customers and using the insight to anticipate customer needs and innovate to remain meaningful.
Slack, is a B2B collaboration tool, that tackles the very pressing issues of organisational agility and cross-functional collaboration and communication. Slack continuously invest in understanding their customers and meaningfully expanding product functionality — targeting efforts based on what is important for their customers. As a result, Slack has a very strong retention rate: 80% of Slack’s paid customers will still be paying 5 years into their relationship.
02 Being reliable and easy to do business with
When companies are reliable and make it easy to resolve issues, customers are more likely to stay with them. A reliable brand meets the promises made to customers throughout the end-to-end experience and when things don’t go according to plan, the company is trusted to solve issues for the customer.
Monzo, a digital challenger bank in the UK, has as a goal to make it as easy as possible for customers to get the help they need, when they need it, and they’ve been successful at this. Monzo anticipate what customers need from them and do extensive cross-functional research to hone in on customer attitudes to money and how they use their platform. Much can be resolved straight through their app, this reduces the effort of managing money and resolving issues with Monzo. However, when customers want to reach out to a human, customer service representatives can be reached 24 hours a day. Customers are also given the chance to flag when something urgent, ensuring that they never feel left to their own devices. Monzo now lead the UK industry both in customer service and retention.
03 Focusing on how customers feel
Customers evaluate companies based on the way that they make them feel. Therefore, focusing on evoking positive emotions in customers throughout their experience with a brand is a great way to retain customers.
Every interaction a customer has with a brand induces an emotional reaction in them, which will vary in intensity, and range from negative to positive. And although brands don’t not have full control over how a customer experiences them, thoughtful and deliberate design can go a long way in influencing the type of emotional response that customers have. Spurring these positive emotions in customers will enable the creation of wonderful, compelling and memorable experiences — which are the key to building a strong emotional connection with customers.
Superhuman, a company with the fastest email experience in the world, is known for creating a product that is deeply meaningful for its users. Its founder, Rahul Vohra, says: “most companies obsess over what customers want and need; we obsess over how they feel”.
Another company that connects at an emotional level with their customers is Xero. It knows that managing accounts is a painful and confusing process for small business owners, and that they often tackle accounting with rudimentary excel spreadsheets or clunky hard to use software — with the risk of getting accounts wrong. As a response to this, Xero created a cloud-based accounting software that is beautiful, easy and pleasant to use. Customers love Xero, because it reduces the pain of managing company accounts; they feel deep gratefulness, as the beautiful and easy to use software has reassured them and made a previously tedious and stressful task enjoyable. As a result, Xero has a retention rate of over 90% of their 1.8 million subscribers worldwide, and customers now look to Xero for managing their business, beyond accounting.
In summary…
Thoughtfully creating a product/service offer that is deeply meaningful for the customer, orchestrating a reliable and effortless service and crafting emotional nuance into the customer experience are sure-fire ways to retain customers. These are also great ways to grow revenue from current customers and extend their lifetime with a brand. These loyal customers are also more likely to recommend brands to their peers, reducing customer acquisition costs.
