Customer Retention: Complete Guide And Strategies
Customer retention is a set of activities aimed at retaining customers over the long term and turning them into loyal buyers. The ultimate goal is to turn initial customers into repeat customers and maximise their Lifetime Value (LTV).
Companies are increasingly thinking in terms of LTV because a customer is not always profitable from the first order – LTV takes into account many more parameters, such as the average life of the customer, the customer retention rate, the profit margin per customer, the average amount spent by a customer over his or her lifetime, etc.
Why is customer retention essential in B2B? How to calculate it? What levers and strategies should you use to retain your customers? We tell you everything in this article.
Measuring the challenge of customer retention in B2B
Customer retention in B2B is very important because it helps you understand how loyal and satisfied your customers are, how well you are serving them and whether there are any red flags that might put off potential customers.
Focusing on customer retention pays off in the long run:
- Lower cost than customer acquisition: according to Econsultancy, 82% of companies say that customer retention is much cheaper than customer acquisition, but many companies spend much more on acquisition instead of nurturing the customers they already have.
- Increased average basket: Not only does it cost less to retain existing customers, but they are willing to spend more over time. Studies show that loyal customers are 23% more likely to spend with you than the average customer.
- Increased profits: Caring for customers and retaining them over time will also have a positive impact on your bottom line. Data shows that a 5% increase in customer retention can increase profits by 25% to 95% and that existing customers account for 65% of a company’s turnover.
- Brand ambassadors: the best thing about loyal customers is that they tend to share their positive experiences, thus becoming ambassadors for your brand. This is priceless. According to Yotpo, 60% of consumers tell their family and friends about a brand they are loyal to. With word-of-mouth growing exponentially, customer loyalty is a necessity for your business.
The basis of all this is still to use your CRM well to have a good customer file. Some tips:
Calculation of the customer retention rate
Customer retention rate (CRR) is the percentage of customers that a company has retained over time.
To calculate your CRR, you need to subtract the number of new clients acquired from the number of clients remaining at the end of the period. To calculate the percentage, divide this number by the total number of clients at the beginning and multiply by 100.
TRC = [(Clients à la fin de la période - Nouveaux clients pendant cette période) / Nombre total de clients au début de la période] x 100
Customer retention rate is the inverse of the churn rate, or attrition rate, which is the percentage of customers a company has lost over a given period of time.
Other indicators are crucial when talking about customer retention: you should also look at your turnover (if it is decreasing), the rate of repeat purchases, the loyalty indicator (based on surveys such as “would you recommend this product to a friend?”), and of course the LTV.
Average retention rates across the customer lifecycle are not uniform.
If you want to properly improve retention at all stages of a customer’s life, you first need to break down customer behaviours according to the stage they are in – short term, medium term and long term – and understand why they churn. Depending on the stage a customer is in, they will unsubscribe for different reasons. Retention and churn reduction are not universal solutions.
There are in fact 3 types of unsubscribing depending on the stage:
- Churn onboarding: this is short-term churn. If you find that it is very high, you need to think about how to improve the customer experience.
- Churn renewal: here, we are thinking more in the medium term: how can you constantly improve the customer experience to make them stay? What are the potential bugs in your product? Communicate constantly to ensure that your customers are satisfied and want to keep your product in the long term. Be easily accessible in case they encounter problems.
- Satisfaction-driven churn: once your customer is satisfied with your product, how do you increase the LTV of that customer in the long term? This is about improving existing customers. If they want more value, you can offer them bigger plans or exclusive options.
It cannot be repeated often enough: use numerical indicators for all your actions in your commercial processes:
Levers to act on customer retention
In order to act on retention, you have to “zone” customer loyalty. This involves using predictive modelling to identify the degree of loyalty of a customer: you can develop your own criteria and then score your customer from 1 to 3 for example.
Acting on retention also means assessing a customer’s own situation: basically, you have to ask yourself what might make a customer want to go to the competition.
- Acquired customers: it was not a good fit, the customer and you got it wrong.
- Customer onboarding: this went badly and the perceived value of your product or service fell below the cost (price, but also integration cost, change management, etc.).
- Customer satisfaction: it’s like when you fly. When everything is going well, you don’t pay too much attention to the company, etc. But when you have a 12-hour delay, it’s make or break. But when you have a 12-hour delay, it’s make or break.
- Customer relations: The human relationship, particularly in B2B, between the buyer and his account manager is fundamental to promote retention. We can prevent this by continually adding value, prevent it by detecting the risk of churn, and when we have failed to do so, work on win-back, i.e. convincing a customer who has said he is leaving for the competition to stay.
- Differentiation is about limiting the options for change for your customers. If nobody can do what you can do, it’s much easier to keep your customers. This brings us back to our stories about segmenting (again…) the customer file. Identifying the customers for whom you have a real differentiator and the others is a huge economic performance lever.
1. Retention strategies to acquire the right customers
1.1. Pricing: a fundamental element of customer retention
Contrary to what we sometimes read, a low price rarely has the effect of lowering customer expectations, especially in B2B. In reality, expectations are fixed – high or not – and the whole point of pricing is to put your offer in front of the right segment, and the right expectations.
Proper pricing not only helps you retain customers, but also increases your revenue potential. Whether that pricing is based on the market, the value of your product, or per-user pricing, choosing the right pricing helps you get off to a good start by quickly weeding out the customers with the highest churn potential.
Pricing is too important to be neglected, and there is always room for improvement. If you had to remember only three things:
- Always charge by value – no excuses. This is by far the optimal strategy.
- Target the right buyers. Make sure your price points match your ideal customers.
- Don’t complicate things. Keep your pricing structure simple for better acquisition.
1.2. ICPs and segmentation (again and again)
The challenge in customer retention is above all to avoid churn. Churn is almost immediate and is almost always linked to a bad acquisition.
The key to this is segmentation and the definition of a good KPI.
The KPI is the profile of a fictitious organisation (company, government agency, NGO, etc.) that will obtain value by using your products and services and thus bring value to your company.
Basically, this is the type of customer you want and who wants to buy your products. In concrete terms, it is above all the type of customer for whom you will make commercial and marketing efforts.
This does not mean that you only deal with one type of client, but rather that you prioritise them. On the contrary, the KPI should not be fixed, and you should evolve it regularly.
Your KPI will therefore depend on :
- The situation you will enable him to solve
- Your goal
- Your means
1.3 Setting up the right incentives for your sales teams
Customer retention is closely linked to the work of your sales teams.
In B2B, there are many things you can sense when you are on the phone with a customer, many things that are not said, even things that are said but never really noted. These things are only known by your sales teams.
You should therefore encourage your sales teams to favour deals that are most likely to last over time. This is another way of formalising the notion of KPI, but relying more on the emotional intelligence of each of your sales people.
It’s not always easy to put the right incentives in place for your sales teams: one of the most obvious biases for sales people is to maximise the volume of transactions to earn commission. This is the classic bias of theestate agent, who will prefer to sell two properties at a lower price rather than one property at a higher price.
Our advice: encourage, whenever possible – a priori a year-on-year bonus will have little impact – and make your teams aware of the need to acquire good customers.
Do you want to implement these different strategies to make sure you get the right customers? We suggest these articles:
2. Onboarding strategies to improve customer retention
2.1. The “aha!” moment
Even if your product is packed with amazing features, if customers don’t have an “aha!” moment right from the start, they may jump ship. If you’re in charge of retention, it’s your job to show users the value of your product as quickly as possible.
For example, reorganising your onboarding process to take users to the most interesting features immediately. Secondly, customers feel more confident in choosing your company because they have already tested some of the features and renewals are almost automatic.
In short, teams often think that retention is something to worry about once users have adopted the product. But in fact, customers’ very first interactions with your product set the stage for what they will expect in the future. If you impress them from the start, they will stay with you longer.
2.2. Collaborative selling
It all starts with the idea of collaborative selling. The principle is that a sale is a partnership, especially if you think about LTV (LifeTime Value).
The only point where objectives differ (and still do) is on the share of value generated that the seller should capture. On the wholesale price.
But the seller’s objective is – or should be – to find the best possible solution for the customer, so that the partnership goes well, lasts long, and generates maximum value. In B2B, the buyer’s objective is exactly the same.
Basically, if you really put the customer at the centre of the problem for everyone in the selling organisation, you create much more value. You don’t have to spend hours negotiating for scraps.
Tools such as Accord help to create a real collaborative atmosphere at the time of onboarding.
The principle of the tool is to provide a shared workspace between you & your customers.
In concrete terms, you propose a “Mutual Action Plan” to your leads, and you work together on a shared checklist.
You decide to make each item public (or not), you can invite members of your team, and your leads and/or customers can do the same as the sales process progresses.
They recommend offering qualified leads access to a shared checklist after the first discovery call, to engage them on next steps.
A little added bonus: for each deadline, Accord will send a reminder email. This saves you from having to deal with the sometimes complicated reminder mails when the deadline has been missed by the client, and makes things much smoother.
The exact pricing is on request, but expect to pay around 100 euros per month. They offer a free trial, so check it out!
Accord offers a free trial to give you an idea of the possibilities of the tool.
3. Strategies to improve customer satisfaction
3.1 Be impeccable in problem solving
Do you know why livechat is the most highly rated customer service method?
It’s simple: it’s the fastest.
In customer support, speed of response is key, and this applies to all the support channels you use (email, live chat, phone, etc.). In fact, customer service is what keeps 56% of customers loyal to brands.
3.2. Anticipate frequent friction points
There are a few sticking points that often come up in B2B. We help you avoid them:
- Keep track of your customers’ feedback: to do this, you can set up email satisfaction questionnaires. Make sure that the answers are easy to send, and that they are taken into account.
For maximum efficiency, set up an automated workflow to ask customers about their recent interactions with your business. Send them for customer service interactions, buying experiences, etc.
- Learn from customer complaints: whether they come in the form of emails, direct calls or comments on social networks, always treat them as valuable sources of information to improve your brand.
Another crucial element in building customer loyalty is to make your customers feel heard. Whenever you do something to solve a problem reported by a customer, make sure you let them know you appreciate their feedback and thank them for their contribution.
- Create educational content: the idea is to engage your customers, highlight your helpfulness but above all to establish yourself as an expert in your field. You can do this by creating tutorials on how to use your products, for example.
You can also maintain a blog and newsletter to address topics of interest to your customers. When developing your content strategy, focus on educating customers at each stage of the buying process: awareness, consideration and advocacy. This will maximise their engagement and help them move through the cycle.
4. Strategies for developing customer relationships
4.1. Gift for gift
Reciprocity is the social construct that makes the world go round and keeps customers coming back. It’s very simple: people react according to how they are treated. If someone is treated well, they treat you well in return.
No wonder that consistent quality of service is one of the main drivers of repeat purchases and recommendations.
And while reciprocity works incredibly well on its own, research shows that it is far more powerful when it is unexpected. Remember the time someone did something nice for you that you weren’t expecting? The gesture probably wasn’t that unusual, but the fact that it came out of nowhere probably left a strong impression on you.
Think about how you can surprise your customers with a nice gesture: a gift, a handwritten thank you note, etc. It’s a small investment, but it can build a very strong relationship with a customer.
4.2. Detect customers at risk
To detect at-risk customers, parameters associated with future churn must be identified and measures taken to address them.
We can start with churn: this is a direct reflection of the value of the product and the features you offer to customers. It has a direct impact on financial metrics such as LTV and CAC, so they need to be constantly monitored.
For example, if your CAC is high but your LTV is low, this means that customers are leaving the business early on and you need to find out why. Once you have identified the reasons why customers drop out at certain stages, you can improve the situation and retention will increase.
Customers at risk are also those who are completely inactive. You can search internally to find those who have not logged into their account for some time.
Then, feel free to send them personal messages, asking them why they haven’t used the product for a while – try to see if you can do anything to improve their experience. You can use this opportunity to offer additional features or a better package.
Make sure you write personalised follow-up emails to make your customers feel noticed and valued. In addition, create a strategic framework to follow up even if there is no response.
4.3. Build a clear win-back process
It is always easier to win back an old customer than to acquire a new one. The first step is to reach out: why weren’t they satisfied with your product or why did they leave?
It could be something as simple as a failed credit card payment. If this is the case, contact the customer and ask them to update their credit card details. If this happens frequently, a more robust dunning process needs to be put in place, not only to ask for the money owed, but more importantly because it is the best way to find out why a customer is no longer paying for your product.
But there is also the case where a customer has deliberately abandoned your product. Perhaps the customer’s company has suffered budget cuts and can no longer afford your product. If this is the case, you should try to communicate with them as much as possible, be flexible and show that you want the customer to succeed in using your service.
Customer relationship management is one of the major functions of CRM software. And that’s good news, we’ve written a whole bunch of articles to help you choose your CRM software:
5. Differentiation strategies to improve your customer retention
5.1. Differentiation in the traditional sense
Differentiation can start with the more traditional aspects of your business, i.e. your products and services. Here are some aspects of the latter to consider:
- Multiple products for the same client: this is the idea of the “Cost of switch”, and it is a fundamental differentiation strategy. For example, Adobe is gradually migrating its customers to its entire suite of tools. The idea is that we differentiate ourselves from others within an account, more and more, by a lower and lower integration and onboarding cost. And then we double the prices 😈 (joke).
- Differentiated products and services: more traditionally, this is about reducing competition in the market and having a substantial influence on customers’ mindsets.
- High service component – products with a high service component make it easier to retain a customer. This is because the customer does not want to experiment with other products from other suppliers.
5.2. Make your customers your ambassadors
This is a super important point of customer retention: you can make your customers the ambassadors of your company!
Differentiation does not necessarily mean different for everyone, and your customers can promote your products around them.
The important message here is that there is often a tendency to work on customer satisfaction to improve retention. This is obviously an essential lever, but it brings an important bias: we only focus on unsatisfied customers. Don’t forget the others!
This is the engagement bias. If your customers have gone out of their way to promote you to their entire network, on public platforms, and are mentioned in testimonials on your site, this is a real retention lever.
It’s obviously a little less crude than that, but a good ambassador programme will engage your most satisfied customers all the more, and make them real allies.