Why customer retention is an incredible growth strategy

Let's cut to the chase and make it clear...

A happy customer will spend more money with you, and your business over the long-term.

A happy customer will become your biggest advocate and referrer of new customers.

A happy customer is someone who doesn't question why they're regularly spending their money with you.

You're meeting their needs and offering excellent value to them, and they'll happily hand over their hard-earned cash for the services you provide.

This is why it's always worth plugging any leaky holes in your own customer bucket before considering any new growth strategies. Don't go after the shiny new customer until you have your fundamental customer happiness strategy under control.

Retention can and should be an incredible growth strategy for all businesses to deploy!

Developing deeper relationships with your customers

As we've talked about many times on these pages, we feel subscriptions are the best business model for sustainable growth.

This is because they offer the opportunity for any size business to secure recurring revenue from regular customers, cementing a long-term relationship that takes your community on a real journey.  

Ultimately, subscriptions are all about building a deeper relationship with your customers, listening to their wants and needs, and serving them exactly what they demand to purchase and experience.  

It's where supply and demand meet, with no doubt as to what price to charge for what is being received. It's also usually much easier (and cheaper) to keep a customer than it is to find a new one.

Getting the lingo right

Before we delve deeper into some retention tactics, it's always worth getting an overview of exactly what all the technical terms mean.

So here's our brief glossary on what to look for when trying to keep your current customer base happy.

Retention: Nice and simple. It's how many of your customers you keep over a specified period of time. Losing lots of customers one month? Your retention is poor.

Keeping the majority of your customers happy month to month and they're regularly spending cash with you? This is good retention and engagement with your business!

Churn: Being able to put a figure on how many customers are leaving you. For instance, if you have 20 subscribers and 2 have stopped paying for your services or unsubscribed from you, well you're now seeing churn of 10% each month.

Customer Acquisition Costs (CAC/CPA): How much it costs you to acquire each individual paying customer. This could be high or low depending on your industry and product/service price.

You just need to make sure it's a low percentage in relation to how much cash that customer is going to bring you in. See below for an example.

LTV (Lifetime Value): For subscription-based businesses, this is the holy grail.

Say it costs you $10 to acquire each new customer, but they go on to pay you $10 every month for 12 months. That means their lifetime value to you is $120

You can project this amount into the future to get a real feel of your predicted revenue over a specific time, so for example 12 months x $10 could be your annual target base revenue.

But if you keep these customers content and happy, their value to you over time could increase to $240 (2 years), $360 (3 years), and beyond.

By getting a firm grip on LTV using subscriptions, you can actively predict your future revenue and plan for a solid future for your business.

The magic art of listening

One of the most important aspects of running a successful business is to really start listening to your current customers and prospective leads.

It's often said that we have one mouth and two ears so as we can listen twice as much as talking.

Unfortunately in day-to-day life this often goes out of the window, but when running a business, it's something super important to remember. This is especially worth remembering when running a subscription business, where people can cancel their recurring payment to you at anytime (yes subscriptions can cut both ways).

So make sure you get into the habit of actively collecting feedback and finding out how you can constantly improve what you're doing, your services, and the products that you offer.

It's always important to remember that the vast majority of your customers are looking for evolution, not revolution from you.

So before getting super pumped about a new idea or rapid change in direction, make sure you can carry the vast majority of your customer base with you on a shared journey that everyone wants to be part of.

Tips to improve your listening capacity

Don't feel the fear: As a business owner, embrace the good and the bad.

Be as proactive as possible in going after actionable feedback, and definitely don't leave data gathering to chance. Take the time to survey your audience regularly about what they want to see more of and if there are ways you can constantly improve your offering.

If you ever receive a stream of bad reviews or feedback then don't get downhearted, be proactive in realizing that here's an opportunity to put things right.

Our pro-tip: don't take it personally!

Use surveys and data gathering: Find key moments in your day to gather insights when your customers are willing to be honest with you.

Say someone has just taken a yoga class with you, learned to cook a new recipe at your cooking club, or received their monthly subscription coffee package. At this point they should be fairly receptive to your contact if their brain is in the same space of thinking about your business.

Send them some survey questions such as :

1. Tell us how your experience was, what could we do to improve it?
2. Is there anything we could be doing more of, or any new services you'd be interested in us running, new days we should be doing something on?
3. What would it take to recommend our service to a friend?
4. What content would you like to see me create more of?

Steer your audience in a direction that gives you clear, usable data that you can translate into the product and service you offer.

By asking direct questions, you can serve your audience better, making sure you achieve what we call in tech, product-market fit.

This means again you're serving exactly what your customers want to see and of course, what they're willing to buy from you.

Nerd out on numbers

It may not be sexy, but get to know your numbers using software tools, link shorteners and stats from Google Analytics.

This way you'll be able to find out who is interacting with your content, website and where your traffic is coming from, and what is converting.

Measure email open rates, who is opening them, and what is generating clicks. If you have consistently high open rates then you'll know you're serving your audience well.

Get used to A/B testing subject lines and content formats and get a grip on how long people stay on your pages for. If they bounce regularly then you want to see why this is happening.

Find out what works and then repeat, repeat, repeat, building this into your content and communication strategy to your current customers and future potential leads.

Know your customers - 1-1 if need be

So we've established that it's important to get a good grip on what your customers respond to and how they act (sometimes, confusingly that can be different if they love your brand but still aren't making a purchase).

But at the end of the day, keep talking and keep listening to your customers because happy customers = spending more cash with you.

As your business develops, get used to segmenting your customers and audience and getting a grip on how you can offer a curated experience to them and get the most value from them in the long run.

Segmenting your customer base

Big fish - You'll likely find that within your business, you have a core number of regulars who probably deliver a big chunk of your revenue. Take the time to really build a relationship with these 'super users' and over time grow this amazing community out.

These guys will be your advocates, your evangelists, and ultimately the people who power your business forward, making everyone feel part of something and offering value beyond what you can offer as the business owner.

Treat these people well, surprise and delight them, and they'll be an internal and external marketing machine for you.

The steady middle - these guys will likely be consistent customers and easy to manage as long as you provide a regular service that offers good value for money.

There's no need to over-promise or under-deliver to these customers, just keep them happy and you'll build a sold pool of regular recurring revenue that will continue to grow as this segment gets bigger.

Newbies, floaters and the expired -  it's much easier to re-engage lost customers, offer samples to newbies or engage sporadic purchasers, than elaborately and expensively trying to recruit totally new customers who have no understanding of your brand and concept.

Get a feel for the people on your mailing list, social media, etc, and target them with some offers, or even better send them a link to a free trial if you run one.

8 Tips to increase customer happiness and retention

1. Make sure you're sending a welcome email to your new customers and  get the messaging right. Customer happiness and retention starts the day a customer signs up for your service.
   
   Start off on the right foot, tell your story, make people feel good, and set the rules of engagement and expectations of what being a 'member' of your service or customer of your product is all about.
2. Post regular content and emails giving an insight into you, your personality, and what sets you apart from the competition.
   
   For example, we'd recommend making sure your 'output' (emails, social media, messages with individual customers) are as interactive as possible, making it a 2-way conversation.
   
   This will help you win hearts and minds and turn these opportunities into an opportunity to reflect your brand, tone of voice and show a real human being behind your business.
   
   If your audience is just receiving a constant stream of marketing messages from you then they'll quickly lose interest in your service or product, likely unsubscribe from your free newsletters and then the opportunity for you to convert them to paid customers will be lost.
   
   Take the time to use the data to see what content you're publishing is receiving the best open rates, click rates and if you can identify patterns in consumer behaviour.
3. Remember to survey your customers as often as you can, by gathering the insights and answers from questions you have.
   
   Be specific with the questions. If your audience is taking the time to fill in a quick survey then make their input count to help inform how you run your business and make their experience even better.
4. Gather great reviews and testimonials - Keep shining a light on the happiness of your customers and use this as an opportunity to screengrab or link to your testimonials, so as you're amplifying the customer good-vibes.
   
   Use your social channels to regularly share success stories of customers enjoying what you do and over-share on the good vibes.
   
   Happiness in life can be strongly tied to a crowd mentality so share share share and you'll keep current customers engaged and secure yourself new floater customers in the process.
5. Just finished running an online session on zoom or in real life? Use this time to interact with a few attendees and get them whilst they're hot.
   
   Facilitate requests for feedback on email after the class, offer them some personality and insight into you, and always be available just to shoot the shit and come across as a real human being.
   
   Even just a few minutes of genuine human interaction with your customers can go a long way to building a community of evangelists of your brand.
6. But avoid cliques and giving too much power and airtime to the biggest personalities/voices in your community.
   
   This can be a big turn-off for many people and is something to look out for when trying to build a community of engaged customers. Don't let anyone dominate the agenda of your community, and ultimately take charge of the narrative you're trying to build with your customer base.
7. Provide bonus content and behind the scenes access for your favorite customers.
   
   Give indicators of what these will be, and sell the vision of why someone should stay a subscriber or customer next month, in 3 months and in one years time.
   
8. Celebrate your customers birthdays and anniversaries of being a part of what you do. Whether in a physical, virtual or digital way, find opportunities each week to offer value and the personal touch in everything you do.
   
   If you celebrate a customers' one year milestone, then you may be able to keep them for another 2, 3 or 4 years be showing them the path you're taking them on and what that will mean for them, and how great life will be if they stay as part of your network.

Hitting the sweet spot

So to wrap things up, simply make sure you offer a great service or product that people are willing to pay for, and keep striving to make it better and better each and every day.

When you start to achieve the win-win of a really solid customer base, mixed with a steady stream of newbies arriving through the door, then you'll know you're making a real success of your business.

This may not happen over night but keep pushing in the right direction and this success will follow!

Until next time...keep winning...

Jonny Quirk

If you like what you've read here, have your own success story, or want to join the conversation around entrepreneurship then hit me up on Twitter or check out our YouTube channel - I'm always around!

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