Customer retention and churn pack a punch when you look to improve the overall customer experience. It’s arguably the most important factor to understand where customers experience problems with your product and what you can do to fix it before the relationship is put at risk. The probability of success in selling to an existing customer is 60 percent to 70 percent, while the probability for a new prospect is only 5 percent to 20 percent, highlighting the value of hanging on to those customers you already have.
According to McKinsey & Company, happy customers are 87 percent more likely to purchase upgrades and new services than are unhappy customers. In order to usher more of your customers into that happy camp you need to work backwards and first determine how the unhappy ones got that way in the first place.
Reasons for Customer Churn
According to customer experience experts, the exercise of reverse engineering churn is often the best place to begin when looking to improve your customer retention. By identifying areas of peak drop off and tracking why those customers leave, you can better understand what areas need to be addressed to improve retention. Consider tracking reasons for churn, coding them into categories related to typical reasons for churn, and identifying who to work with to mitigate the problem.
Common Reasons for Churn
|Incorrect Use Case||Marketing and Sales|
|Failure to Launch||Sales and Onboarding|
|Features and Functionality||Product and Customer Support|
|Low Usage||Customer Support and Onboarding|
|ROI and Value||Customer Support Metrics and Relationship Management|
|Client and Organizational Changes||Customer Support and Relationship Management|
Source: Alka Tandan
Retain Your Customers
“The practice of customer retention is a cornerstone to the overall customer experience. It's necessary if you want to be a successful business and grow. If you don't have some kind of oversight or mechanism in place to monitor, manage, and improve partner and customer experience, you shouldn’t be in the business of serving customers at all,” says Vendasta Senior Manager of Partner Relations Rashida Bencherif.
“Often we lean on these great minds within our organizations - in sales, development, and business, for feedback and direction. But, if our customers aren’t happy, the rest of it is just a moot point.”
According to Rashida, retention is about ensuring each interaction, phone call, or email exchange with your customer has the consideration of great customer experience and partner relations built in.
“Customer retention is not just about a dedicated process and department. The ultimate goal is to ensure everyone within an organization has the right insight, information, and context for how that customer journey can be improved so that if something is going wrong we can right that ship before it hits an iceberg,” Bencherif says.
Customer Retention at Every Stage
Similar to the concept of onboarding at every stage, customer retention at every stage is equally important to the overall customer experience.
“Being proactive is key. We don't want to just wait until we have rocky relationships. We want to get ahead of it and improve the overall process from the very beginning,” says Bencherif.
- Point of Sales Strategy: Begin by laying out the basis of the client experience and the client journey when you sell to the client. The way to look at this is defining what is the core value of the product you sell, how do you break that down into super simple terms, and how do you express it over and over. Know the product well enough that we can break it down into simple, value driven elements that any SMB can understand.
- Post-Sales Engagement & Reselling: Set it and forget it is not a winning strategy. One of the bigger offenders in post-sales engagement is how poorly sales organizations go around and resell to their clients. Sometimes they just forget. You need to be reselling your clients on your product, based on its relevance and trust or the value of the product itself.
- Sales Training: Product mastery through simplicity. “Salespeople should be talking about value, features, advantages, benefits, how a product makes the client more money, and how it's going to drive more customers. It should never be a conversation that's based on jargon, industry terms, and fancy technical terms. Leave that to the product folks and to the client services folks if and when that client wants to get into deeper conversations. As a salesperson, you own the conversation by keeping it super simple,” Tennison says.
- Product Sales Support: Two heads are always better than one. Product sales support creates more credibility all the way around and it allows the salesperson to stay focused and specialize in what they're supposed to be talking about, which is value. This allows the product sales support organization to get in the weeds and discuss specific details. Then the salesperson can actually sit back, strategically listen to the conversation, and then reinsert themselves right at the key times when the client is giving buying signals.
“In my years of sales, one of the biggest things that you can say to someone that generates trust in you as an expert, and it's going to sound totally oxymoronic, is to use the phrase, ‘I don't know.’ I'm a sales guy, in what world does that make me a digital products expert? To say the words, ‘I don't know.’ It creates the idea that this guy really does care about listening to me and answering my questions, and that he's not just going to make something up," says Tennison.
Strike a Balance
“Customer retention is certainly sales adjacent, but our conversations with partners are not sales calls. There are other factors that we can look at and our ultimate goal is maintaining that relationship.”
To focus on customer retention is to become an advocate for your customer as well as an ambassador for your brand. It’s a delicate balance that comes with practice, and in some cases it’s a balance that can eventually topple over, resulting in the end of that relationship.
“You can’t save them all. Sometimes there are factors that are out of your control, but you can learn from those cases. We get tremendous value out of the feedback they provide in the end, and it’s important to take what we learn from those conversations and apply it going forward,” Bencherif says.
Customer Retention Tools and Techniques
With countless conversations under her belt, Bencherif provides her top tips for customer retaining:
- Listen: Emails are a great and efficient way to communicate with your customers, but nothing can compare to picking up a phone and hearing about the challenges your client is facing first-hand. Reach out and listen to your customer, and make them feel heard.
- Clarify: After you’ve taken time to absorb their concerns make sure you reiterate what you heard back to them. Ensure your customer knows you understand their problem and if it still isn’t clear - ask again. By moving forward on a solution that doesn’t entirely address their problem you risk making the situation worse.
- Have Empathy: In some cases a client may be upset because of personal problems they are experiencing, so display empathy and seek to understand their frustration and that it may not be entirely caused by their interactions with your brand.
- Take Your Time: Avoid rushing through a customer retention conversation. If you’re pressed for time, ask for the client’s permission to end the call and allow you the opportunity to dig deeper into their area of concern. Give them a call-back date and time - and stick to it.
Vendasta's Churn Study on 100K+ SMBs
Vendasta examined over 100,000 small-and medium-sized business (SMB) client accounts of our digital agency partners. The study examined client retention with local marketing service providers over a two year period, examining major factors such as:
- Sales approaches
- Upsells and timing
- Product engagement
- Number of products sold
- Vertical vs horizontal specialization
The study revealed that all five factors had a substantial impact on client retention rates, with a needs-based sales approach, the number of products sold, and product engagement having the largest effects.
Key Findings on SMB Churn
Some key findings our churn analysis revealed:
- Identifying the needs of local businesses with needs-based selling and providing relevant solutions increases client retention by 30 percent.
- Upselling has the highest impact on the lifetime of your clients at the three-month mark, indicating that early re-evaluation is important. 62 percent of clients that were not upsold within the first three months churned within two years.
- Selling a local business owner one product has a retention rate of only 30 percent after two years. Selling that SMB just one more product showed an increased retention rate of nearly 20 percent, while selling four products showed a retention rate of 80 percent.
- A proper onboarding is key to retention. The sooner that clients engage with the solutions they have purchased, the higher their retention rate. Clients who engage weekly have a 26 percent higher retention rate than those who do not.
- Understanding and serving the unique needs of an industry will improve retention. Vertical-specific marketing providers have 15 percent higher local business retention rates after two years than non-vertical sellers.