Valuable Tactics to Improve Customer Retention and Boost Loyalty
Online retailers are constantly having to balance growth and retention. At the beginning, growth is the top priority, but as a company matures, it needs to focus on customer retention, which is in fact a great growth leverage. Retention is what continues to pay the bills and attracts more customers. There’s a lot of industry research out there pointing to the fact that monetization and retention-based growth are much healthier long term than acquisition-based growth. And since plenty of articles are written on the topics of retention and loyalty, we thought it’s best if we drill down into a very specific area. Think online and think a recurring revenue model. You’re selling digital goods? Totally applicable. Selling physical goods? Think Dollar Shave Club, think logo rental, think grocery subscriptions.
Improving customer retention, reducing subscription churn and increasing customer value, while hard, is not impossible. Let’s outline some tips on how to do it:
1. Make sure you target the right kind of customers.
For retention to work, you need to acquire the right kind of customers in the first place, those that will value most your product. Build a profile of your ideal customer, their purchasing and engagement habits, understand what they appreciate most in your solution, and how you meet their needs and solve their problems. This includes your method of communication with them, both before and after the sales process.
2. Find your North Star metric.
While subscription companies come in all shapes and sizes, they have one thing in common: each has a quantifiable action or metric that can be correlated to customer retention. There's a threshold, which, once crossed, indicates a clear affinity on the user’s part for your company. Your job is to find that North Star and use it to get customers to stick with your product.
3. Get a customer success program in place.
Helping customers get the most out of a product or service is critical. In fact, a whole industry — customer success — was created to support it. A customer success program helps your customers with everything they need to achieve success while using your product. A typical set-up includes support for onboarding and implementation, as well as ongoing support. Basically, you need to aim to delight and retain your customers, especially if you sell subscriptions. “Delight” needs to contain satisfaction and growth elements. Unless you help someone grow in whichever way that applies to your business, they're unlikely to stick around for long, even if they're satisfied with your offering. Speaking of satisfaction, don’t forget to measure that, both in terms of degree of satisfaction and NPS score — the latter showing how likely they are to recommend your business. Also, understand the satisfaction dependence on product features, support, reputation or anything else that matters to your customers.
4. Understand what success means for your customers.
Share knowledge and expertise to help customers use your product better and achieve more satisfactory outcomes. Understand what they're aiming to achieve by using your product and how else can you help them do that. Can a new partnership help your customer use your product more efficiently or enhance certain aspects of their life/work and increase their commitment to your product or service?
5. Connect with customers in several ways, via multiple channels.
You can send tons of emails and newsletters, but these might not be as effective in reaching enough customers or getting the engagement you desire. Test and understand what works best for your audience and provide consistent quality of support across channels.
6. Get personal.
Personalization is one of the most popular trends in e-commerce. Customers want to be engaged individually, with suggestions or solutions based specifically on their needs and past purchases. Embrace it!
7. Fight churn effectively.
While retention strategies and tactics should help improve customer satisfaction and increase retention, some churn is unavoidable. Fortunately, there are specific marketing, commerce and payments tactics and tools that you can use to combat both voluntary and involuntary churn.
Voluntary churn means that a customer decides to stop using your product or downgrades to a free version. Tactics to combat voluntary churn include email reminders, manual renewal offers, and cancel flows. Of course, the most important thing here is to understand why they want to cancel their subscription. Therefore, getting feedback to understand cancellation reasons is paramount.
Involuntary (also known as passive) churn happens when subscriptions are canceled without any action on the customer's part. This is mostly due to failed payments, for various reasons. While there are several reasons why payments fail, there are multiple ways to prevent and recover them, from intelligent payment routing (which prevents payment failures before they happen) to retry logic (retries failed cards several times), account updater services, and dunning management. Also, ideally, you want your customers to subscribe with an auto-renewal model. Auto-renewal translates to high authorization rates across all geographic segments and payment methods, making it one of the most effective strategies for reducing passive churn.
In general, making it easy for your customers to renew is another point worth making. Therefore, keep testing and optimizing your renewal process.
Alexandra Marcu is vice president of marketing at 2Checkout, an online payment processing service.
