Signing up a new customer is a great feeling. If you’ve been chasing that prospect for months, the experience is even more rewarding. But could you be spending too much time on customer acquisition? By devoting more time and effort to those already on board, you can strengthen existing relationships and retain customers for life.
According to research from management consultants Bain & Company, increasing customer retention rates by just 5 per cent can lead to a profit increase of 25-95 per cent. The implications for profitability and productivity are obvious.
“Across a wide range of businesses, customers generate larger profits each year they stay with a company,” said Bain’s Fred Reichheld.
“Return customers tend to buy more from a company over time, while your operating costs to serve them decline. And they’ll often pay a premium to continue to do business with you, rather than switch to a competitor with whom they’re neither familiar nor comfortable.”
Learn to predict the signs of customer churn
For Kat Fisher, head of customer success at Disciple Media, it’s essential to build strong relationships with customers if you want to retain them. Disciple Media is a high-growth SaaS business that helps community managers – be they individuals, institutions or businesses – build their own mobile-first community spaces
“By really getting under the skin of our customer’s situation, it sets us up for a positive relationship going forward,” Fisher said.
“Once they’re up and running, our customer success team focuses on helping all of our customers to get the most out of the platform with hints, tips and best practice. We’ll explain new features and developments, and listen hard to the feedback we get,” explained Fisher.
“There are certain churn predictors you can look out for, like low end-user engagement or slow growth of an app audience. In these cases, we’d reach out to see how we can help. Ultimately, our goal isn’t just to have happy customers – we want customers who become advocates of our platform. Advocacy is a key to success for any business.”
The company uses both technology and human contact to monitor their existing clients and ensure they remain customers for life.
“We have some usage metrics we keep an eye on, like time spent on the platform and frequency of login. But it’s the qualitative feedback and the creativity we see when our customers are engaging with their communities – that’s where we get real satisfaction that the product is being used to its fullest.”
Founded in 2015, Disciple Media is based in Camden and has a team of 25. The company built its initial customer base within the music industry, helping bands to create mobile fan clubs.
“Over time, other content creators have come onto the platform and we now have a wide variety of communities interested, from villages and constituencies to faith organisations and charities,” said Fisher.
Use your customer retention figures to inspire change
Barnaby Lashbrooke is the founder of virtual assistant platform Time etc. Established in 2007, the Birmingham-based company has 25 permanent staff and a turnover of £4.2m. Earlier this year, Lashbrooke switched strategies to focus on developing customers for life.
“We spent 10 years putting new business first, but towards the end of last year, we noticed customer retention was quietly slipping,” he said.
“I was talking to a corporate finance person who asked for our retention figures and I didn’t know what they were. I went away, looked into it and found they were lower than we had realised. I’m glad she asked – our retention is now at the highest level it’s ever been. Focusing our strategy on retention has easily been one of the most powerful things we’ve ever done.”
For Lashbrooke and the team, improving customer retention has involved some simple but effective strategies. “There’s a lot of picking up the phone. We’ve invested a considerable amount in expanding the team, so we have the time to speak to all our clients,” he said.
“We’ve built software that spots trends for us and segments our clients into user types. We learnt, for example, that clients who download our smartphone app are more likely to stick with us, so we’ve put lots of effort into getting people to install it.
“Another process we’ve developed is around matching clients to the right virtual assistant. Now, we’ve struck the balance between the human experience of working with a virtual assistant and the automation of task setting.”
The improved retention rates and the growing number of customers for life have had a knock-on effect on productivity.
“Our team spends less time dealing with customer issues or fixing problems. Instead, they can focus on providing an amazing service for our clients,” said Lashbrooke.
“The biggest growth opportunity for us came from looking within – don’t assume growth is external,” he added.
“Don’t be too defensive over what you’ve built, even if you’ve had really good feedback. It’s inevitable that there will be weaknesses or something you could be doing better. If you fix them now, the result will be faster and more sustainable growth, and the ability to achieve excellence.”
Customers for life are key to small business success
Emma McDonald, the owner of Stems, uses Florismart to help with customer retention. Florismart, a digital networking and buying platform, connects her directly with reputable growers. It makes the buying process smoother, more cost-effective, and allows her to stock exactly what customers have asked for.
Developing customers for life has been crucial to her success as a small business, with limited capital for marketing and new customer development.
“Retaining customers is really important to me,” she said. “I built my business from £200 six years ago, so I didn’t have money for paid advertising. I relied on my customers being happy and satisfied with my service, and I’d say that was – and still is – key to my success. For me, getting to know my customers and their buying habits is important.”
“I often find myself reminding our male customers of their wedding anniversaries or wives’ birthdays when I notice they haven’t ordered flowers for the occasion. And I get to know what colours and flowers their wives do and don’t like. That means brownie points for the husband, which we’re always thanked for.”
McDonald has found that flexibility can help to retain customers for life. “A lot of florists have a minimum spend,” she said. “I choose not to. If one of our older ladies pops in with £8 to spend, then we’ll pick £8 worth of flowers for her and wrap them beautifully. She may end up popping by on a weekly basis and buying a birthday card or gift while she’s in the shop.”
Offer rewards to help customers feel valued
Shaun Bell founded Joshua James, a fine jewellery retailer, in 2006. He named the business after his young son.
“One of the main ways we retain loyal customers is by offering rewards,” said Bell.
“We have a loyalty scheme based on a points system, so when a customer buys something – no matter how small – they receive five points for every £1 spent. When these points total 100, they can be converted to money off anything online.
“As a small business, it’s important that our customers feel valued. Ultimately, that’s why people choose to shop independently. They want to support small businesses and we recognise this.”
To build a body of customers for life, the company has a database of those who have signed up to receive updates and news. Bell and his team identify opportunities on a monthly basis and email exclusive discounts to these customers.
“For new customers, of course, we offer subscriber discounts. But those who receive our newsletters get the best deals overall,” he explained.
“We’re always keen to support the needs of our long-standing customers, so we’ll assist collectors of a particular brand or collection. For example, one of our bestselling brands is Trollbeads. There are avid collectors out there who return each season to purchase the newest launches. We take time to keep a record of their purchases, so we can make sure we’re leading them in the right direction when it comes to selecting a new item.
“This takes time, but we do it because it builds trust and shows we care.”