How to achieve a high customer retention rate? It’s pretty much common knowledge: To achieve the most impact, work on the 20% that matters, that which will make the biggest difference. You can apply the same principle to customer retention. The least effort, meaning once you’ve set the following foundation strategies, it’s up to your organisation to make it happen.
Convince management (or if you’re management, make it a priority for your business and weave it in to everyone’s KPIs) that this is worth prioritising as it can lose you customers (i.e. revenue) otherwise.
1. Know what you need to change
Because assumption is dangerous and you simply don’t know what you don’t know (the unknown unknowns), you need reliable, actionable insights to know about what you need to change.
“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”
Donald Rumsfeld (U.S. Secretary of Defence from 1975 to 1977)
Many companies simply don’t know where they are falling short. One study found that while 80% of CEOs believe they deliver a positive customer experience, in fact, only 8% of their customers agree (Bain & Co). By collecting and analysing customer feedback, businesses can focus on the right things, instead of throwing money blindly at acquisition, which often is a bottomless bucket.
You won’t know what your customers really need or what they don’t like unless you ask them. It can be as simple as sending informal surveys a few times a year, to gauge how you’re doing. And, by using a system such as Net Promoter Score (NPS) businesses can understand who their customers are, what they like and dislike, and most importantly, how they can improve to better meet their customers’ needs.
Most unhappy customers, 96% in fact, simply don’t complain (1st Financial Training services). That’s an incredibly high number. Why? Either they feel it’s too difficult, (are your surveys dull, complicated or too long?). Or, they’ll just Tweet it. Or, they simply don’t think it’ll change anything. More often than not, they just can’t be bothered (guilty!). They must be used to companies not listening to their feedback.
Be the one that bucks the trend and actually listens. Worst-case scenario: your customers just walk away, but you’ll never know why. They may not tell you, but they’ll tell their friends. And so, it begins.
To ensure they respond to your surveys, make sure your message is as personal as possible and demonstrate that you have already taken previous customer feedback on board.
Of course, surveying your customers means collating a lot of data and you need to be able to easily sort and analyse it. Text analytics tools help analyze your data and pull out insights that are actually actionable. Which leads us to our next point …
2. Get data-driven insights with text analytics
Great – so you’ve done your survey and have your NPS. To get deep, data-driven insights, which you would otherwise miss, don’t forget to analyze your free-text responses to your open-ended survey questions. What did they actually mean by “good service, yeah, right”?
If you get one negative comment about the ease of use or your online purchasing, that’s usually not reason enough to go and invest $10,000 into a new eCommerce website. But, if 10, 20 or even hundreds of customers all have the same issue and comment on it, it’s time to do something about it. It’s important to have the right systems in place so that you can pick up on these themes in the first place, before your competitors claim market share.
How to get data-driven insights from your feedback? You can do this with text analytics. It’s analyzing the free-text responses that often cause the biggest headache for data analysts, so making this process simpler is a big step in the right direction. With a text analytics tool that tracks and analyses customer sentiment, it’s easy to spot common trends and customer pain points. Making sure your insights are actionable, is a huge part of this.
And, if you collect lots of good data, make sure you actually use it. One study found that only 15% of senior leaders actually use customer data consistently to inform business decisions (Harvard Business Review).
If surveys are out of the question or if you don’t think you get enough value out of them, you can run analytics on your social media comments, customer reviews or chat logs, too.
At Thematic, we have developed an AI algorithm that automates analyzing free-text feedback in surveys using machine learning and natural language processing, and in essence, simplified the way businesses are getting insight from their customer data.
3. Don’t lose them in the first place
Well, duh. Virtually every business loses some customers, but few ever measure or recognize how many of their customers become inactive. Most businesses, ironically, invest an enormous amount of time, effort and money to build the initial customer relationship. Often, they let that relationship go, in some cases even losing interest as soon as the sale has been made. Or even worse, abandoning the customer when easily remedied problem occurs, only to have to spend another small fortune to replace that customer.
It’s a leaky bucket! Once you stop the leakage, it’s often possible to double or triple your growth rate because you’re no longer forced to make up lost ground just to stand still.
One way to not lose your customers in the first place is to understand which customers are “at-risk” and focus on them. If you have a system in place to alert you, then great. Otherwise, by implementing Net Promoter Score and using a program that alerts you to pick up on the “detractors” that gave you a low score, asking them why and offering something in turn to rectify your mistake, you are able to save them before it’s too late.
4. Build your whole business around the customer
“Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers” (Amazon Leadership Principles: Customer Obsession). This was, in fact, one of Steve Jobs’ mantras and likely a huge reason for Apple’s success.
Every step of the customer journey has to work in unison from researching online, prospecting, talking to sales reps, customer service and onboarding – along with synergy in your multiple channels (online, retail, social etc.).
Needless to say, a great customer service and customer experience is key to making the customer the center of your business. This is a whole other topic in itself, which we won’t go into detail here but consider the following. 60% of consumers will move to another channel when online customer service fails and more than 50% of customers will abandon their online purchase if they don’t find or receive an answer to their question – and – for online retailers, these channel escalations account for $22M of unnecessary service costs (“Transform The Contact Center For Customer Service Excellence”, Forrester Report, 2016), so making the customer the centre of your online strategy is essential.
In a customer-centric business, when the customer wins, you win. Almost every business has this as its goal, yet few achieve it. Why? Often, it’s a cultural change that is needed internally, which can take a long time to attain fully. If your whole business is centred around the customer being successful, you’ll achieve a high customer retention rate. Weaving a high NPS score into employees KPIs, valuing and using customer feedback is only a part of the story.
Start internally by developing a good employee engagement rate, through a positive, rewarding and supportive culture. If your front-line employees feel satisfied in their work, chances are higher that they convey this feeling towards the customers they deal with on a daily basis too.
This also motivates the employees to provide extraordinary service, encourages them to be consistently pleasant in all of their dealings and to relate to customers in a warm, human and natural manner.
As many as 81% of employees said that they’re motivated to work harder when their boss shows appreciation for their work (Glassdoor, 2013). Often, but not always, high employee engagement results in better, warmer, stronger, more trusting relationships and longer-term bonds with your customers. In essence, your customers will like you more. Why is that important?
“A significant aspect of customer loyalty comes down to your likability. People will almost always remain committed to a brand if they believe they’ve developed a genuine and mutually beneficial relationship” (Entrepreneur.com, 2015).
5. Creatively leverage the power of the loyalty program
Creating a loyalty program is the obvious way to nurture customer relationships. This way, you are able to identify, track and sell more to those customers who are most likely to become your long-term sources of revenue.
By having a program that rewards loyalty, you not only provide additional value to your customers, for example by way of a points system or VIP rewards, but it also becomes much more difficult to choose a competitor.
You can reward for number of purchases (the classic buy 10 get one free), rewards for total amounts of spending (spend $500 get a $25 gift card), or for example pay a certain amount upfront and receive rewards (Pay $199 upfront and get free shipping).
And don’t stop there – be creative! Keep rewarding customers for completing other actions like writing reviews (you can target this specifically to your “promoters”), taking pictures with your products and tagging friends, sending referrals easily to friends and sharing on your social channels.
As an example of a successful loyalty program, Starbucks gives its Gold members the opportunity to earn double “stars” on purchases. They surprise their loyal consumers on a different day each month, which helps keep things exciting and prepares customers to spend more money on a particular day.
And yes, it’s worth it. More than half of customers would consider increasing the amount of business they do with a company for a loyalty reward, and 46% already have (Clickfox).
6. Show you care – continuously
This may well be the one factor that can improve your retention rate more than anything. It comes down to having great customer support (again, employee engagement is important here), where the care-factor plays a more important role than ever.
Surprisingly, speed isn’t the most important thing when it comes to customer support resolutions. Although 60% of people complaining on Twitter expect an answer within an hour (Twitter), it’s the quality of the response that matters. In a Gallup study, researchers measured how “engaged” customers felt after using the services of a particular bank. Customers who felt that they received speedy service were 6 times more likely to be engaged, but customers who rated employees highly because they were courteous or their willingness to help were 9 times more likely to be engaged (Gallup).
Another study demonstrates how customer satisfaction is higher when the customers have been well taken care of, even if they had experienced an issue with the service. A survey done by an airline showed that amongst the customers who hadn’t had any issues (cancelled flight, lost luggage), the customer satisfaction index (CSI) was 70. Customers who had experienced serious issues but then been well treated by the customer service staff reported a CSI of 77. So, people on delayed flights ended up being more satisfied if they felt they were taken well care of. The ones who did not get adequate care fell to a CSI of 50.
Showing that you care makes a huge difference. How an experience makes the customer feel matters more to customer loyalty than effectiveness or ease, as per a study by Forrester Research. In fact, emotion was the number one factor in customer loyalty across the majority of industries studied.
Sending regular, personalised emails and newsletters is a way to show your customers you care even when there are no issues. Even something as simple as a Happy Birthday message every year goes a long way to making your customers feel special.
The loyalty program and your customer retention strategies should be put in place as soon as someone becomes your customer. Then, measure success by monitoring your customer lifetime value, loyal customer rate and improvement rate.
And, if you’d like to increase your customer retention by finding hidden customer insights in your customer feedback, get a free a demo on your data now.