How To Win At Customer Retention

Customer retention increases your customers' lifetime value and boosts your revenue. It also helps you build amazing relationships with your customers. You aren't just another website or app. They trust you with their money because you give them value in exchange.

So why do so many businesses focus 99% of their time on customer acquisition?

The reality is that your customer isn’t truly ‘acquired’ unless they’re in it for the long run. If not, they aren’t really your customers; they’re just strangers passing through.

If you’re familiar with lifecycle marketing you’ll know that once you’ve ‘acquired’ a customer, you need to continue to nurture them throughout their customer journey.

Much like building a human to human relationship, you need to be able to impress your customers, delight them and show them you value them. But most importantly, you need to keep looking for ways to do more for them than anyone else is doing.

The cold, hard truth of the matter is this…

Failing to prioritise customer retention is like trying to fill a bath without the plug in. Yes, you can keep the water running, but the bath won’t ever be full.

You need to find the plug.

Did you know that acquiring a new customer can cost five times more than retaining an existing customer? Retained customers tend to be your happiest, most satisfied customers that drive a higher lifetime value (LTV) so it makes perfect sense to focus your attention on these people.

Ready to get started?

Great. 

But first, let’s take a look at what your current customer retention rate (CRR) is. Your CRR is the percentage of customers who stay with you over a set period of time. In order to work out your CRR you’ll need the following data points to hand…

1. Number of customers (S) at the start of a period
2. Number of new customers (N) acquired during that period
3. Number of customers (E) at the end of that period

Got them? Good. Now plug those figures into this formula:

Customer Retention Rate = ((E-N)/S) x 100

Here’s an example:

At the start of the month we have 1000 fitness app customers. At the end of the month, we have 1050. We have lost 150 customers and acquired 200.

((1050–200)/1000)) X 100 = 85%

So, 85% of our customers are continuing to use the fitness app, giving us a CRR of 85%.

Now let’s look at Churn

Churn is something you want to do everything you can to avoid, it’s the detractor to CRR and will decelerate your businesses growth.  Just like CRR, churn should be calculated over a set period of time.

Your churn rate is the number of customers you lost over the set period divided by the number of customers you had at the start.

It's pretty easy to work out, but you might also like to look at the types of customers who churn. 

For example, if you have a fitness app with a free 7 day trial, losing a trial member is bad news but losing a paying subscriber is much worse.

You can calculate revenue churn rate too using the following formula:

Revenue churn rate = revenue lost over the period ÷ revenue at the start of the period.

Now you know how many people are leaving, it’s time to look at why those people are leaving so that you can put a strategy in place to fix it.

There are a couple of different ways to do this…

Survey your customers

Set up a customer satisfaction survey to measure how happy your customers are with the product or service you provide. In that survey it’s important to also ascertain your Net Promoter Score (NPS) by asking the question ‘how likely are you to recommend [business name] to a friend?

If you don’t already have a customer satisfaction survey in place, build one ASAP. There are plenty of handy tools you can use such as SurveyMonkey or TypeForm. Once you’ve built your survey think about sending it to new customers as well as older customers at set points along their customer journey.

Identify the problem

If you look carefully at your customer feedback and go through the journey with a fine tooth comb, there’s likely to be a few recurring themes. It could be missing features, billing issues, lack of information etc. 

Whatever it is. Look for the recurring comments and address them as soon as you can.

Top tip: Are you making it easy for customers (and leads) to give you feedback? A simple feedback button on your website is a good way of making sure anyone who has a comment can communicate with you easily.

Like a lot of things. Timing is everything.

Although it may seem like it, in reality customers don’t make snap decisions to stop buying from a business. In most cases, your customers will stop using your product or service over time, no matter whether it’s a vegan protein bar or a monthly vitamin subscription.

Then, out of the blue, you’ll send them an email which will remind them that they’re no longer using whatever it is you offer and BANG. They leave  you and churn. The decision was probably made months ago.

It’s SO important to get ahead and address your churn rate as early on as you can, that way you can fill in the cracks of the breaking relationship.

How do you reduce churn?

Hopefully you’ve followed along carefully and you’re now armed with your churn rate and some idea of what might be causing people to leave your business. Great work.

Now it’s time to look at the strategies you can put in place in order to drive that churn rate down. Here are a few ideas to get you started…

Deliver LOTS of value

Adding value to your customers is one of the best ways you can boost customer retention. Start by thinking about what else you could do to surprise and delight your customers. Perhaps you could provide really great free content in the form of blogs, a knowledge centre  or perhaps you could include something fun in their next delivery (think sweets, thank  you notes, fun stickers etc)

Avoid ‘one size fits all’ marketing

In the post internet world your customers expect a highly personalised experience. So don’t send the same content to your most loyal customers as you would to a newbie. Use a CRM tool to segment and personalise your customer journeys depending on who they are. Whatever you do, try to avoid the cliche’ ‘we miss you’ guilt-trip.

Leverage reciprocity

Acts of kindness make people want to repay them: that’s why reciprocity creates retention. Surprise emails, personalised thank you notes, unexpected incentives — small touches like these can have a big impact.

Offer great support

Don’t you get frustrated when you have a problem but can’t get through to anyone? Well, it’s the same story for your customers. Like you, they expect immediacy. Don’t leave them frustrated by making them wait for a response. Offering fantastic customer service is a sure fire way to drive retention.

So, there you have it. 

Your guide to analysing, identifying and reducing customer churn. As I mentioned at the beginning, your relationship with your customers should be seen as a friendship, and friendships can’t be built overnight, they take time. Stay in it for the long run and you’ll no doubt reap the benefits.

A final word: no matter how brilliant your business is there will always be some customers who are just not the right fit - and that’s ok, in fact it’s totally normal. You can’t appeal to everyone.

And so when a customer does decide to leave, remember your relationship with them. Don’t fight back, let them go graciously (without pushy follow-ups!) and aim to stay friends. You never know, they may return one day.

If you enjoyed this article and want to learn more about how to grow your business and nurture your leads into loyal fans, then let’s talk. Message me here on LinkedIn. Call me on +44 (0)7828 144 037, or you can send an email to georgie@peppedup.co.uk

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About the Author, Georgie Carter

I'm a Marketing Consultant and the Founder of Pepped, a lifecycle marketing agency for health and wellness businesses.

I wish I had a pound for every time a stressed founder came to me saying they're frustrated they aren't:

✓ Communicating effectively with their leads and customers

✓ Getting enough leads into their sales funnel

✓ Retaining and nurturing customers

✓ Building a loyal customer base

If you're anything like the other business leaders I speak to, you probably understand the value of lifecycle marketing and CRM but know you aren’t capitalising on it. You know that you're probably losing out on new customers, but you don’t have the expertise or time to fix the problem.

Well, the good news is....

WE CAN HELP YOU ► We work with UK and US entrepreneurs and leaders disrupting the fitness, health and wellness industry, from Unicorn status global brands such as Houzz and Hims to scale-ups such as Alexia Clark LLC and Jennis (Dame Jessica Ennis-Hills's fitness app). 

SPECIALITIES ► Lifecycle marketing, CRM, email marketing, customer journey mapping, lead acquisition, content creation, content strategy, sales funnel optimisation, copywriting, website design, customer retention, customer engagement, customer loyalty and referral strategy.