6 Customer Retention Tips that Beat Last-Minute Churn Prevention
In 2015, the highly-rated cleaning service startup Homejoy suddenly announced that their business had tanked. Expensive lawsuits filed by former cleaners were to blame. Soon enough, though, their real problem emerged: Homejoy failed in retaining their customers.
In the failed startup’s defence - they’re not the only ones. Although it’s well-known that keeping customers is between 4 and 10 times cheaper than acquiring new ones, Econsultancy showed that it’s still the latter that the majority of businesses focus on.
The problem, or so Michelle DeHaaff criticizes in her LinkedIn post, is that most retention measures are implemented only when customers are about to jump off. But doubt has already kicked in by that time, and budging customers is hard.
1Use customer loyalty programs as door openers
Many baristas hand out stamp cards, rewarding frequent customers with a free cup. It’s simple and seemingly successful - the prospect of a clear reward in exchange for loyalty in an industry with cheap, interchangeable products.
If these baristas, however, terminate the program, how likely are customers to leave for a similar card-offering competitor? If the company hasn’t used the customer’s many visits for building a relationship based on other qualities, then the answer is “very likely”, as the examples in this HBR article show.
It’s a common misconception about loyalty programs that you can “buy” a customer’s loyalty. The truth is, loyalty in exchange for a reward lasts as long as the program and its benefits do.
A loyalty program doesn't buy you the type of loyalty you expect from a good spouse that sticks with you through the ups and downs - it buys you the loyalty of a gold digger that leaves the millionaire once the stock market has crashed.
So let’s take note, first of all, of what a loyalty program cannot do. It cannot, in any true sense, create loyalty.Joseph C. Nunes & Xavier Drèze, HBR
That’s why its most effective use is that of getting a hold of customers in the first place. To buy some more time to convince them of your actual qualities. Customer loyalty programs with a tiered reward structure also help in generating the purchase of more, or more expensive, items. Also, they always provide valuable data about customer behavior.
Psychological research has identified various ways to design effective loyalty programs.
Joseph C. Nunes and Xavier Drèze found, for instance, that customers are more motivated to complete a program the closer they got to its end. Therefore, it makes sense to start not at zero, but at, say, 20 out of a 100 required points.
Even better, make it 200 out of 800 required points. Psychologist Arthur Markman found that when getting closer to the goal, people are more pleased with a program that features higher digits and are more likely to recommend that program to friends. Here are some great loyalty program designs that can help your customer retention.
2Act even when your customers are silent
According to the U.S. Chamber of Commerce, 68% of customers leave because of bad treatment. Still, customer service is often undervalued until churn is imminent.
But, like in our private lives, being courteous and attentive only after you’ve noticed the other side nearly had enough won’t get you far. And as research by the Lee Resources Inc. showed, only one in 26 customers complains. So, even if you're acting on the feedback you receive, you’ll risk losing a considerable number of customers when you wait for them to come up to you.
Customer retention and churn prevention are not the same thing. Customer retention is the complete display of a purchase’s value to the customer at any stage, churn prevention is the final lifeline when your retention strategies weren’t good enough.
You can shed some light on the silent churn through surveys, feedback boxes, direct reach out, user activity and usability tests. But no matter how successful you are in that, measuring customer service quality should be given high priority throughout any department, sales stage and situation. Eventually, your service is what makes you accessible to customers. Contact channels severely influence your actual accessibility.
Count in dishonesty. We all know this situation: Eating out with friends, the waiter asks whether you enjoyed the meal. You say “yes, all fine”, while actually you thought the service was pretty bad. Next time you’re planning to eat out, you’ll consider another place. The restaurant’s owners, however, will never know why. They never had a chance to react.
Humans frequently lie “to avoid insulting others through disagreement or discord.” We avoid conflict, especially with alternatives at hand and especially with someone who we have established a relationship with. So customers need to be encouraged to share what bothers them.
3Track usage patterns
A decrease in usage or inactivity since your customer’s signup or last purchase could mean that they have wrong expectations of your product. Which will eventually lead to churn. Same goes for not fully set up accounts.
It’s crucial to monitor these metrics because once decrease in usage has set in, it kicks off a domino reaction. Longer intervals between uses or purchases make customers less likely to return. So, finding ways to remind customers of why they bought or showing them new reasons to buy is an inevitable customer retention strategy.
Take payments: Despite popular belief that they are the negative counterpart to the joy of receiving a product, this isn’t the whole truth. Payments also reinforce customers’ perceived value of provider and product. According to HBR, they “increase attention to a product’s cost, boosting the likelihood of its consumption.” In this sense, they can be viewed as a way to trigger confirmation bias.
As HBR noted in reference to research, a customer’s product usage drops from the moment on when the payment was made. In subscription models, customers use a product most steadily when paying monthly and least steadily when paying annual fees.
A customer who doesn’t use a product is unlikely to buy that product again.HBR, John T. Gourville & Dilip Soman
Only a customer who knows how to get the maximum out of a product will see its full value. Webinars, training, tutorials and manuals help you provide them with an easy and successful start. Savvy consumers will look out for these options before they buy. Highlighting resources will give them full capability in a product’s usage.
4Set realistic expectations
Online customers are used to flicking through numbers of websites on their hunt for the perfect product. When they quickly recognize that they won’t find it on your page, they move on, unaffected.
If they recognize your product isn’t for them only after building up expectations, or worse, after the purchase, this leads to disappointment. Disappointment inspires anger, and anger isn't easy to deal with. Most angry customers will churn. Disappointment kills customer retention.
Which makes truthfulness in product descriptions and communicating realistic goals essential. Your product must live up to what you promise. Also, it’s not clever to mask downsides which don’t seem to matter for your average customer’s planned application of a product. You may take fire from the few ones that uncover such attempts.
A wave of support tickets tells you more about customers than you might think. Unlikely, such customers randomly happen to experience a certain issue, and another one, and another. More likely, they are insufficiently trained or have unrealistic expectations concerning the product. Abandon the fire and forget mentality and investigate root causes.
Have the goals been discussed and set already in the last sales stages? Were they realistic and did the customer receive sufficient onboarding and training to achieve them? Did such information about goals and existing skills survive the journey through your different departments?
Review these questions and proactively inform customers about what goals have been reached. Analytics and statistics tools engage them to keep track of their goals themselves. This and setting new goals will keep up their motivation and make them see that your product’s value is scalable.
5Communicate with clear purpose
Done right, reaching out to customers on a regular basis can make them return frequently. Ideally, the content of your message has relevance for them. But here’s the problem. Too many companies are spammy. They struggle to differentiate between what’s a good reason to reach out to their customers for them and what’s a good reason for their customers.
Honestly, how often were you planning to make a purchase in the moment when you received a store’s newsletter? Offering customers products or deals with no relevant context is aimless communication. Doing so on a regular basis is spam. Spam means churn because after continuous exposure to irrelevant information, every sane person starts to think: “irrelevant company.”
The antidote for aimless and spammy communication is purpose. It can create relevance in any of your outbound messages. An example how simple purpose can be added: Instead of “Check out our brand new collection” (as seen in countless fashion retailer newsletters) it’s better to go for something like “Check out our fresh holiday-looks” (as seen this May in ASOS’ newsletter).
Sure, summer season as purpose, that’s not as personal as a birthday card plus discount coupon. But it’s a relevant context since it was the German newsletter and all of us, including me, are living in the same climate and will need to dress accordingly.
Purpose though, is not only needed to sell something, especially in B2B. It also means being proactive when you hear about staff changes in your customer’s company and offering training and assisting in onboarding of new people in charge.
Likewise, it means informing customers about changes in your company, product development updates and pricing changes - about anything that’s relevant for them, too. Don’t underestimate the power of dedicated communication in customer retention, independently of the content.
6Be sharp in your positioning
Online consumers are promiscuous by design. Most of them share the mindset that there’s always a similar provider in reach. Or that it’s hard to distinguish vendors and providers. Thus, they are ready to move on anytime. If you’re one of the many copycats in ecommerce, you probably reinforce this mentality. Also, it will be hard to break through all the advertising noise online customers are confronted with these days.
On the contrary, if you show them that and how a sustainable advantage makes you different, you can make customers stay and return. Positioning your company means targeting consumers’ ideas of your company, product, or industry, and giving them a new perspective. For marketing professor Sameer Mathur, “positioning is an organised system for finding windows in the mind.”
Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect.Sameer Mathur
Such windows can be opened by setting yourself apart from your competitors in comparison, by stressing benefits and attributes of your product or business, by highlighting usage opportunities, or by pointing out the "unique characteristics of specific users"
An inevitable read, and the source of some of above thoughts on positioning is Positioning: The Battle for Your Mind by AI Ries and Jack Trout.
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