Director, Strategic Customer Success
Engaged, long-term customers that’ll stick with you no matter what.
That’s the end-goal of any given business, right?
But building a base of loyal customers doesn’t happen by accident.
Modern consumers are spoiled for choice when it comes to products and services. In any given industry, competition is fierce.
Meanwhile, those same consumers are being bombarded with more marketing messages than ever before.
Ask yourself: what are you doing to keep customers around for the long haul? How do you keep your biggest brand advocates from bouncing to a competitor?
These questions are exactly why businesses today can’t afford to ignore customer retention.
In this guide, I'll break down everything you need to know about customer retention based on my experiences and what we do at Copper, including:
What is customer retention (and why does it matter so much)?
Customer retention is the process by which a company keeps its customers over a period of time. Ideally, a company will keep the majority of its customers and reduce the loss of customers (aka churn).
The concept of customer retention might seem basic, but many businesses neglect just how much the ability to retain customers impacts their bottom line.
On the surface, retaining customers is a net positive for productivity and morale. Rather than constantly chase down customers and face rejection, teams that can consistently retain customers know that they’re doing right by their buyers. High retention gives you peace of mind.
Customer retention also influences your business’ ability to predict the future. For example, understanding your average customer retention and churn rates can help you more accurately project revenue.
Pro-tip: Understanding customer retention can improve your sales forecasting efforts because it makes you better at determining what the future holds based on buyer behavior.
If nothing else, customer retention is a cornerstone of the Relationship Era. Nurturing your customers and understanding why they stick around (or bounce) requires you to have frequent, meaningful conversations with them. If you want your customers to stay, you should be invested their success.
Customer retention statistics you need to know
We can talk up the importance of customer attention until we’re blue in the face.
But hey, don’t just take our word for it. Below we’ve broken down some notable statistics that highlight why businesses need an explicit strategy for customer retention.
1. It costs five times as much to obtain a new customer than it does to retain one. (Source)
Takeaway: Although businesses should obviously pursue new customers, don’t neglect the value of the ones you already have.
2. It’s 50% easier to sell to existing customers than it is to new prospects. (Source)
Takeaway: No surprise here. Think about it: your current customers already know and trust you. Through upselling and cross-selling, businesses can increase their customer lifetime value.
3. A 5% increase in customer retention can increase a company’s revenue by up to 95%.(Source)
Takeaway: Even a seemingly small reduction in churn can result in a significant revenue boost.
Learn about more strategies to reduce churn and keep customers longer with this handbook.
How to calculate customer retention rate
Of course, understanding how you can improve customer retention and reduce churn means calculating both.
Let’s start with your customer retention rate (CRR).
CRR is a metric that’s calculated based on a specific time period (monthly, quarterly, yearly). Once you decide on a time period, follow this formula based on your customer data:
For example, if you started the month with 50 customers, gained 10 new customers during that month but lost 5 customers by the month’s end, you’d finish the month with 55 customers. Your customer retention rate would be:
55 - 10 / 50 * 100 = 90%
On the flip side, churn rate represents the percentage of customers who stopped using your product or service over a specified time period. Churn rate can be calculated with the following formula:
Using the data from our customer retention rate example, we began the month with 50 customers and had a total of 10 churned customers.
10 / 50 = 20%
Pro-tip: Bear in mind that customer retention rate isn’t the be-all, end-all of tracking your company’s health.
For example, your new or churned customers might not necessarily equal in terms of their subscription tiers. If you gain five new subscribers for a $10/mo tier product but lose two customers at a $50/mo price point, your customer retention numbers don’t necessarily represent an increase in revenue.
Strive to calculate your customer retention and churn rates for each individual product or tier of service.
Regardless, these metrics are crucial for determining how successful your company is at keeping customers around. If your customer retention rate dips, especially consistently, you have a problem. It’s a metric that needs to be watched closely.
Let’s get into a few strategies for improving customer retention.
7 customer retention strategies
So, how do you improve your customer retention rate?
There is no “right” or single answer.
And we can’t stress enough that customer retention requires a data-driven strategy. You need to be able to identify what keeps customers engaged and what causes them to break ties with your business.
This is where a CRM can be a game-changer as you track individual interactions and break down your customers’ behavior.
Below are seven customer retention tactics to consider, all of which can be bolstered by your CRM. Not only will these strategies open your eyes to customer behavior, but they’ll also help you build stronger bonds with your buyers.
1. Segment your customers based on their needs
As far as strategy goes, segmentation really can’t be stressed enough.
No two customers are the same, right? That’s why you should nurture customers based on their needs rather than arbitrary metrics.
For example, segmenting your customers based on value alone is self-serving and doesn’t consider their point of view. Instead, focus on their pain points and the goals that they’re trying to achieve.
What outcomes are they looking for? How can you help them get there? Whether it’s revenue, productivity or something in-between, uncovering these needs and goals are key to customer retention.
2. Map out a successful (and unsuccessful) customer journey
Chances are you’re already identified your biggest spenders and most loyal customers.
But what are the common threads between them?
Perhaps they’re the ones who engage with your emails the most. Maybe they’re tied to a specific promotion or demo.
Figuring out which touchpoints and actions result in long-term customers can clue you in on your priorities in terms of retention.
Conversely, you can apply the same logic to customers who churn. Is there something that they’re missing during the customer journey?
To figure out these answers, you need to keep track of customer behavior. That’s where your CRM comes in.
With a CRM, you can track your customer’s actions from Point A to Point B. Mapping out each individual customer journey via event tracking can highlight the factors that result in long-term customers.
For example, features in Copper’s activity log, such as automated event-logging, make it really easy to see all the different types of interactions you've had with a customer:
This gives the framework to build a roadmap for customers from the onboarding stage to the advanced stage, enabling you to engage with them every step of the way.
So whenever you learn something new about your customer, be prepared to capture it in your CRM. This will give you a clear picture of the customer journey.
Know thy customer
Learn about how to gather + use data about your customers that'll help you retain them in the long run with this handbook.
3. Rethink how you onboard your customers
The sooner you’re able to put your customers on the aforementioned path toward success, the better.
This is why modern companies focus so much on onboarding. You should make it a goal to dial into your customer’s experience to get them to a point where they’re seeing value ASAP.
For example, Copper shows you all the information your company has on a contact (or company) as soon as you type their name into a new email draft, and it's a huge "aha" moment for our customers, showing them immediate value and the possibilities that Copper offers:
During onboarding, talk to your customer and understand what it means for them to be successful with your product. Onboarding “quick start” guides and tutorials are all the rage right now, especially if you’re working in SaaS. Put together these resources and make it your goal to answer frequently asked questions and concerns that customers typically have.
Let’s take a look at some examples of effective onboarding in action.
MailChimp’s initial onboarding email frames their product as ready-to-use “out of the box,” prompting customers to take specific actions to test the waters of their platform:
Amazon takes a similar approach, providing new customers with a variety of hands-on resources so they can take their product for an immediate test-drive:
Onboarding should go hand in hand with the behaviors behind a successful customer journey. Similarly, AppCues highlight’s Acorn’s ability to gamify the onboarding process so customers “level up” as they experience the app:
These onboarding tactics all speak to the need of understanding specific customer behaviors—and their impact on retention.
4. Consistently engage with your customers
Whether it’s through check-in calls, nurturing emails or social media, making frequent touchpoints with your customers lets them know you’re invested in their success.
This again points to the need for segmentation of your customer data. For example, are your customers engaging with your product? What about your promotions?
If your customers are segmented based on their use cases and you have some basic visibility into how they’re using your product, then you can find different trigger points for your interactions with customers.
This provides context for your outreach.
For example, this retention email from Zapier highlights success stories and inspiration for new customers or perhaps those who need a hand navigating their platform:
Check-ins and follow-ups can be tedious and time-consuming—that’s exactly why they should be put on autopilot.
Features within Copper such as workflow automations and message templates allow you to consistently engage your customers throughout their lifecycle to ensure that you stay in touch. For example, you can set up a message series for customers who haven’t made contact in 30 or 60 days to assess their needs:
Set up automated emails to different types of customers when certain conditions are met (such as when they've gone 30 days without contact).
At Copper, we try to get as much product usage data as we can so that we can be more informed about our customers’ needs. If a customer isn't using certain modules that would be super useful for them, we can then show them how it works or provide the support they need.
5. Provide multiple points of support
Pop quiz: let’s say that your customers have a product concern that needs to be addressed right now.
How do you ensure that they get they answer that they so desperately seek?
Having multiple channels for customer support and success is a good start. That means making yourself available beyond an email address or phone number.
From livechat platforms like Intercom to social media channels, you have many options for funneling customers to the right team member or resource. They also make it easier to track your communication with customers and answer their questions quickly:
Providing a comprehensive knowledge base on-site is another smart move. For example, Copper’s knowledge base features step-by-step product guides to answer our customers’ most common questions:
Product-related how-tos and blog posts can serve a similar purpose. For example, Shopify regularly produces articles and listicles related to their products as well as ecommerce-specific topics:
6. Make customer retention a team effort
Customer retention isn't a solo act.
Think about the variety of people in your company across different departments that any given customer might talk to.
Marketing. Customer Service. Sales. The list goes on and on.
That’s the value of using a CRM. By logging every interaction with a team member, nobody is on the dark when a customer gets handed off to them. Cross-team collaboration in Copper, including both manual notes and auto-logged events, provides a comprehensive picture of each of your customers:
This puts your customer in context and allows your team to provide the best experience possible no matter who they’re working with.
7. Personalize your customer outreach
Finally, your customers shouldn’t feel like just a face in the crowd.
Generic, one-size-fits-all messaging doesn’t build customer relationships. (More on how to do that here.) Instead, customer retention and outreach should be based on their unique experience and needs.
A CRM can help with this in two distinct ways:
- With a CRM, you can see individual touchpoints and interactions with customers. This means you can refer back to specific questions, comments and interactions when it’s time to reach out. That’s personalization.
- Secondly, a CRM empowers you to scale your outreach and retention emails. For example, Copper allows businesses to build nurture email templates and plug in details such as your customer’s name, pain points and product history:
This saves you serious time and energy with tedious data entry. Likewise, it keeps you from having to start each and every outreach message from scratch. The beauty of this is that the more you and your customers interact, the more complex your personalization can get over time.
What are you doing to keep your customers around?
Loyal customers don’t happen “just because.”
Improving customer retention requires a specific, data-driven strategy.
And the amount of data we can gather on our customers these days is staggering. Rather than let customers slip through your fingers, use this data to your advantage.
With the help of a CRM, you can clearly map out the customer journey step by step. By doing so, you can better understand what interventions need to be made to turn would-be lost customers into long-term advocates.