Growing your audience is one of the primary goals if you're an early-stage startup. The further your scale the more important it becomes to keep those leads in the sales funnel.
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You've already earned a good reputation with some of these clients but you can't be sure they will purchase again. That's what a customer retention definition is about - increase the possibility of that happening and net clients who further on you can name as regular, returned, or loyal.
Who's Responsible for the Retention Rate
The majority of processes in your company affect how long buyers stay with you. The departments that impact the most are product development, sales, marketing, success and support. They bond on user feedback and can't run under a completely dependent strategy if they don't want to lose the efficiency of their operation.
As the last stage buyers usually face, support has become the most significant for the retention score. The majority of inquiries to support agents are concerned with malfunctions and inconveniences and user loyalty is dependent on how successful their handling and resolution are.
Why Customer Retention Is Important
The acceptable scores in this metric are a key to cost efficiency. It's based on the possibilities to reduce client acquisition and churn costs. Increasing user lifetime value allows getting stable revenue streams and becoming more competitive.
Having a loyal audience allows widening it through references without additional costs and strengthening a positive brand reputation. It's also a valuable source of user insights and regular feedback to track its changing needs and scale your product in the right way.
How to Calculate Customer Retention Rate
As with any success metric like CSAT or conversions, the formula for a retention rate (CRR) is defined in percentage for a certain period of time (from 1 month) and the number of users retained during it (R). R = S - E, where S = clients at the start of the period, E = at the end.
CRR = (R / S) x 100
The same goes for the goal numbers- they are industry-specific, should align with your business objectives and competitor's customer retention benchmarks. It also should correlate with the revenue size and buyer acquisition costs (CAS).
While for the eCommerce single-purchase model, they can't be lower than 20%, for a subscription-based SaaS the values should be above 90%. Some CRM software allows automating this process based on user data input in a system.
Other key customer retention metrics are CSAT, Net Promoter Score (NPS), Customer Lifetime Value (CLV), and churn rate. The last one is the closest one to the value, It's also defined in percentage and equals the number of users lost divided by the number of users at the start of the chosen period of time.
How to Increase Customer Retention Rate
To act on an efficiency gap at first you need to identify it. That's why it requires metrics monitoring and tracking across departments during a period of time, otherwise, the numbers may not show the insights you need.
Let's review what customer retention key steps you can go through and what budget you require to make changes in support and success that can lead to changes in the overall company strategy.
It's clear how to deliver quality service. Providing exceptional personalized experience by being a responsive, empathetic listener who doesn't avoid asking additional questions to get to the core problem.
Bonus points you also get for the first contact resolution - the most clear point for a client for the efficiency of your support team. Response time - as short as possible whatever the channel, whatever is time.
The more channels suitable for users the better as long as agent performance quality is consistent. Proactive updates, engaging onboarding, and effective user education are crucial for the metric. That's what basically completes the best customer retention strategies. But there's more.
Let's review what you actually can do if you don't get enough regular clients.
Audit and Analysis
You can't be sure that the described above picture is always the same. If the monthly CRR, CSAT, NPS, or Churn rate numbers look fine, study smaller periods, reconsider the orientation values and approaches you take to communication. Make sure that clients know whom to reach out to if their inquiry wasn't resolved the first time. All for discovering the gap.
This is a step here to help. Encourage or even reward clients for providing truthful feedback on interactions with your team. Always stay friendly and open to suggestions to build long-lasting relationships. Collect and apply gathered insights. For instance, reducing response time can be done with chat bot customer service tools like Ioni.
Could've been under proactive communication but it's not just about notifications about changes. After closing a ticket, chat with users later to make sure that their issue is fully resolved in an acceptable way and there's no more assistance is needed. Such a strategy also allows identifying at-risk clients and altering the situation timely.
Support is another channel to involve buyers in loyalty programs, educational webinars, market trends, etc. But don't be too insistent - it's not an average marketing channel. Here it's more about gratitude for their choice. Collaborate with other departments to exchange gathered insights and tactics and run a cohesive strategy for the entire company.
Now the selection of tools defines workflow efficiency. That's why make sure that the service, help desk, etc. matches your processes and it's correctly adjusted. Incorrect prioritization and labeling, not fine-tuned routing can lead to a lowering of a resolution success rate.
All in the name - do everything and address any challenges so clients will achieve their goals with your product. So the first step - know and fully comprehend them. This is the basis for well-founded upsells and cross-sells.
Many other actions to increase retention are shared with the support. Let's review the unique steps.
Suggest a structured education process for new clients to ease their initial days with your product or service. According to Visa Digital Onboarding Whitepaper, 70 percent of buyers tend to give up on the account opening if the onboarding experience is too long - what to say about a challenging learning curve for the specific software? Also, continue user training to keep them ready for updates and changes in their goals.
Build up a system for taking the "temperature" of client engagement. It can be through tracking key performance indicators (KPIs) and other user data related to their product usage. This way you'll be able to identify potential issues before they become essential.
Create and invite them to take part in referral programs, case studies, or testimonials. Make sure that they make a good impression of trusted sources since later on as the audience grows the recommendations will reveal the truth anyway.
Detect clients who may be at risk of leaving by analyzing user data using AI engine for predictive analytics. For subscription-based models, establish a well-defined renewal management process. Keep them informed about policy changes to avoid conflicts.
Customer retention is all about being proactive, responsive, and relevant. Today it's impossible without the right software and AI that does not always mean losing personalization. Our ChatGPT chat app for customer support allows following a tailor-made approach and not losing accuracy and time during resolution interactions.