What happens when you acquire a new customer?
If you’re like most subscription-based businesses then you are posting on social media, banging the proverbial gong, and shouting from the rooftops!
And as you should be. This is exactly how you continue to accelerate revenue growth. Right?
Subscription-based businesses are beginning to realize that the true indicator of growth and company longevity has more to do with a flourishing customer retention rate.
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So what is the Customer Retention Rate?
Simply put, the customer retention rate reflects your company’s ability to maintain company-consumer relationships over a period of time.
Your customer retention rate is a critical metric for measuring your growth potential and future success.
So how do you calculate the customer retention rate?
Formula for Customer Retention Rate:
Number of Customers at End of Time Frame – Number of Customers Gained During Time Frame / Number of Customers at Start of Time Frame X 100 = Customer Retention Rate
Calculating Retention Rate
Step 1: Choose a set time frame.
Step 2: Calculate number of subscribers or customers remaining at the end of this time frame.
Step 3: Calculate number of subscribers or customers acquired during this time period.
Step 4: Subtract the number of customers acquired from the total number of customers that remain.
Step 5: Divide that number by the number of customers at the beginning of the time frame.
Step 6: Take that number and multiply it by 100.
Let’s look at this with an example.
ABC Company started the year with 100 customers, gained 25 new customers in the first quarter, and had 5 customers churn.
((120 – 25) / 100) X 100 = 95%
ABC Company has a 95% customer retention rate. Bring out the champagne – they have plenty of reason to celebrate.
But there is still room for improvement. After all, it’s hard to celebrate when ABC Company just lost 5 customers for life.
Improving Your Customer Retention Rate
We’ve calculated your customer retention rate, but now what? We know that we have some room for improvement, but where should you start?
We got your back!
Read on for 5 proven ways that will help you retain your best customers, push other customers to become your #1 fans, and ensure they have experience premium care with your company!
1. Show Your Customers You Care
We all live in a CRM of some kind and many organizations mistake it’s use for only pre-sale. Utilize that same system to store data and information about your customers. Keep track of what incentivizes them and act on it!
They have chosen your products or services so let’s give them some TLC!
You can show your appreciation in many ways such as discounts, bonuses, free content, etc.
All of those incentives can be utilized to alert your customers on new products or services and give you the ability to even upsell.
2. Investigate WHY Your Customers Left
It’s hard to fix a problem that you can’t identify. That’s why understanding exactly what caused your customer to leave is an absolute necessity to increase your customer retention rate.
And did they even mean to leave in the first place? Let’s assume that they did mean to leave.
As you are looking at voluntary churn, uncover why the customers have chosen to leave your business.
One way to do this proactively is through feedback surveys to find out why they weren't happy with your service. You want to create this feedback loop early and encourage your customers to use it often.
The results from the customer feedback should then be used to focus on improving areas that your customers are mentioning.
3. Pay Attention to the Indication of Churn
Depending on the service or product that your business is offering, churn can look different for you.
For SaaS or membership based products, your customers could simply not be logging in enough.
There are many indicators in your business that will show you when your customers are at risk for churn. It is important to establish a retention strategy to identify what leads to retention and churn.
One of the more obvious indicators are complaints. Are you listening to your customers' complaints? If you act fast on their feedback and provide an answer, you can win that customer back and deepen their trust.
4. Live Where Your Customers Live
Have you ever had a problem with a product or service but didn’t know where or how to contact customer support? It’s the worst!
You need to make it as easy as humanly possible for your customers to contact you.
Put yourself in their shoes. If you have a complaint or even just a question, do you really want to wait more than 24 hours to hear back from a representative? Absolutely not.
Make it crystal clear for each customer on how they can contact you for help. And make sure you are responding in a timely manner.
5. Customer Retention Should Start Immediately
From the moment you begin to acquire a customer, your team should be focused on how to improve their experience and improve your customer retention rate.
We all work extremely hard to get the customer over the pay-wall, but your hard work is just getting started.
Provide a simple and easy onboarding process. Set clear definitions and continuously remind your customers of the value that they are receiving.
Your customers chose your service or product over a competitor because of your ability to painlessly solve their woes, and you should continue to deliver on that promise.
Remember that your customers are not experts on your product or service so consider using easy-to-read language, video instruction, and human interaction to ensure their onboarding is being run smoothly.
So What’s Next?
Developing a customer retention strategy won’t happen overnight. But it will take shape over a period of time. Whether you have 1 customer or 1,000, your customer retention strategy should be at the forefront of your mind.
Keeping your customers happy and returning will provide surreal value for your business. Those customers will become some of your best and will organically bring you new business just by talking about their experiences.
Improving your customer retention is the easiest and most effective way to guarantee your company’s long term success.