You might think it is obvious, retention leads to revenue and hence it is important… But why do companies still drive most of their revenue by adding more sales staff and acquiring new business rather than trying to retain the existing ones? Retention is often overlooked and done in a very reactive way, even though there are tons of statistics proving that retention is the more efficient way to drive bottom line impact. Especially in the fast-paced realm of B2B transactions, where every quarter brings new challenges and opportunities, it’s easy to get swept up in the pursuit of new sales. The real gold mine lies in extending your customer contracts and increasing your retention rate.
“Existing customers generate 65% of a company’s revenue, while new customers generate 35%. “¹
–
“The probability of selling to an existing customer is
60-70%
, while the probability of selling to a new prospect is only
5%-20%.”²
Source 1: (Onlinedasher.com Link.)
Source 2: ( marketingblog.com Link )
Customer retention is the art of keeping existing clients engaged and satisfied and by this, minimizing churn. It’s not just about retaining customers but building lasting relationships that transcend transactional exchanges. Ultimately extending a contract involves persuading clients to renew or expand their existing contracts. It’s a strategic move that solidifies the partnership and ensures continued collaboration.
In order to understand the financial impact of customer retention, it requires a well established database to calculate Customer Retention Cost. This simplified metric is derived from the total costs attributed to retention programs divided by the active customers during the period.
In order to create a sophisticated CRC calculation, one should carefully consider all costs associated with retaining a customer. Generally speaking, these costs are related to any team, function or project that supports existing customers. The costs often go beyond your customer success team and can include marketing to current users, training and support, and even product development when adding on to customer loyalty. They might include, salaries and benefits, cost of related tools and software, expenses of customer loyalty programs, marketing activities for engagement, costs occurring via training and onboarding sessions, discounts or incentives for renewals, costs for customer feedback surveys and many more.
This formula provides an average CRC over all customers. However a good CSM should always be aware of the costs associated with every single customer in order to understand the importance of retaining a specific customer and the profitability of his / her actions.
Strategies to increase the retention rate
Do’s
a. Proactive customer success management:
Anticipatory support addresses potential issues before they escalate or even occur.
– Implement a proactive monitoring system to identify potential issues early. Reach out to clients with preemptive solutions or guidance.
b. Personalized engagement:
Tailoring interactions and problem solutions to each client’s unique needs.
– Utilize customer data to personalize communication where necessary and useful. Send tailored content, offers, or solutions that directly align with their business requirements.
c. Customer education:
Providing training enhances clients’ product knowledge and makes them feel engaged.
– Develop a comprehensive training program. Regularly share educational content, conduct webinars, and offer workshops to empower clients with in-depth product knowledge.
d. Exclusive access:
Offering exclusive access to new features fosters a sense of privilege and importance.
– Create an exclusive client community or portal. Provide sneak peeks, beta releases, or exclusive content to showcase their importance as valued partners.
e. Improve the Onboarding Experience
As already mentioned in our blog “The power of implementation and onboarding”, the onboarding experience is a significant factor in long-term customer happiness and hence retention. A good onboarding process reduces the need for extensive customer support.
– Analyze the user behavior and mark drop-off points, test multiple onboarding flows, personalize the onboarding experience with user segmentation, match your onboarding experience to well defined business goals.
f. Improve customer support processes and workflows
Customer support is central to a customer’s experience with software. A customer’s interaction with your support team, along with the ease at which their issue is resolved, often decides if they’ll stick with you long-term.
– Define clear customer success goals and frequently monitor them, ensure a helpful and easy onboarding process, segment your customers and create tailor-made workflows, frequently gather customer feedback, ensure issue prioritization.
g. Invest in automation to support self-guided walkthroughs
If done well, self-guided product walkthroughs can reduce onboarding efforts and reduce necessary resources for onboarding support, and training processes, as customers have the tools to set themselves up for success with your software.
– Track usage data and identify frequency of features in use or drop off points, collect product reviews and feedback, use clear language without jargon, try to make the walkthrough engaging, approachable, and visual.
When done correctly, these approaches will help you to increase your retention rate. But due to the importance of retention there are also a few no-goes, one should keep in mind.
Dont’s
a. Neglect feedback:
Don’t ignore client feedback and make the feedback you receive actionable and accessible for all teams. Actively seek and incorporate input to improve your offerings.
b. Assume continuity:
Don’t assume contract extensions are guaranteed. Continuously work to earn your client’s business.
c. Cookie-Cutter approaches:
Don’t apply generic strategies. Tailor your retention and extension efforts to each client’s unique situation.
d. Overlook renewal timing:
Don’t leave contract renewal discussions to the last minute. Begin discussions well in advance to avoid uncertainties.
The benefits of customer retention
a. Increased revenue:
Contract extensions bring in additional revenue, contributing to financial stability.
b. Cost-efficiency:
Retained customers often require less marketing spend, reducing overall acquisition costs. Leading to improved profit margins.
c. Trust and loyalty:
Long-term relationships foster trust and loyalty, creating brand advocates. Trust and loyalty translate to positive word-of-mouth, attracting new clients through advocacy.
d. Reduced churn risk:
Satisfied customers are less likely to explore alternatives, reducing the risk of churn.
e. Market positioning:
Strong client relationships enhance the company’s reputation and market positioning. A positive market perception attracts top talent and partnerships, further strengthening the company’s position.
Conclusion
In the competitive B2B landscape, the strategic importance of customer retention cannot be overstated. As you navigate the complex world of business relationships, remember that satisfied, loyal customers are not just revenue sources but invaluable assets. By prioritizing the extension of contracts over constant acquisition, businesses can build enduring partnerships that fuel growth, foster innovation, and position them as leaders in their respective industries.
VENMATE: Your partner that increases customer retention
With VENMATE your customer retention rate is one of the key KPIs we want to improve. We want to enable the users to improve their customer interactions and by this, spend time on value adding activities that lead to a better customer experience. With dynamic customer segmentations and underlying workflow automations, predictive behavior, health models and process digitalization and guidance (like the implementation and onboarding process), VENMATE enables proactive customer success management and data driven decision making to increase retention and hence customer LTV.
For more information on VENMATE feel free to visit our website or follow us on Linkedin
