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In addition to acquiring new customers, businesses also focus on keeping their existing customers. It’s a major strategy for both B2C and B2B companies, but this resource will primarily focus on B2B. For B2B businesses currently fundraising or looking for a financial partner, customer retention is a major key performance indicator that can influence many elements of the deal.
Let’s first answer the question, “what is customer retention?” To be honest, it can be defined many different ways depending on the nature of the business, industry, and current situation. The true customer retention definition by authors states that it is the number (or percentage) of current customers (they receive goods or services from your business) that stay customers, renew, or buy again. In simpler terms, if you have happy customers that keep coming back, you’re familiar with customer retention!
For B2B businesses, especially those in software, keeping or retaining customers over a period of time is the true customer retention definition. Time is the key part of the definition, which usually means one year (in most cases). When learning other related terms like renewal rate and churn (more on that later), it’s important to consider the time range of one year. Customer retention could also lead to customer expansion or upsell opportunities, which also looks good on paper for B2B software companies. There are many research topics on customer retention, many of which you’ll see as you keep reading through this resource. With so much to learn, don’t become overwhelmed or intimidated. The most important thing a business can do is focus on the customer and make them happy, and everything else will fall into place. Whether it be the customer retention meaning in tamil or another language, across all industries and types of businesses, it all comes down to delighting customers and putting them first.
Customer Retention Strategies
Now that you’re familiar with customer retention and have a basic understanding of what it truly means, let’s dive into customer retention strategies. Besides keeping customers happy and not having them leave for your competitors, there are many things to consider for a team’s scope of customer retention. A team should first spend time on a strategy before implementing tactics or buying technology to help support their plan. Levels of customer retention strategies for B2B companies include:
- What is the main goal we want to accomplish? How will we measure success? Is there a specific KPI or number the whole team will have access to?
- Once we have a number, what is our customer retention formula to achieve that goal? Should we measure our progress on a daily, weekly, or monthly basis?
- In addition to retaining customers, what is our strategy for customer expansion or upsell opportunities?
- Who on the customer success team is responsible for what? How can this team work with sales, marketing, and product to achieve the company’s customer retention goals?
Alongside the questions above, a customer retention strategies PDF and customer retention strategies PPT are resources that can serve as a great starting point. It’s important to research, collect the right resources, and apply those learning to your specific business in a way that will positively impact the team. Once a sound strategy is in place, the team leader will have full confidence in implementing the plan and positioning team members in the right spots. And remember, every company and business is different! So if you’re a B2B software company, customer retention strategies in service marketing may not be the best solution for you. Or, if you’re a big healthcare manufacturer or enterprise, customer retention strategies in FMCG won’t be the best solution. Choose a plan and the resources that make the most sense for your business and team.
With so much to measure and organize, it’s also important for teams to consider customer retention management. Just like a sales team would use a CRM to manage their pipeline and prospect relationships, customer retention strategies in CRM are also just as important. Prepare ahead of time for key meetings, product releases, up sell opportunities, or any other positive customer retention strategies by staying organized within your CRM or customer retention management platform of choice. However, it’s worth mentioning again that it’s important to develop a strategy before investing in any technology for management or organization. Know what you need before you start spending money on resources or tools!
Customer Retention Rate
Why is customer retention rate so important? As discussed earlier, sales, marketing, and customer success teams need key performance indicators or customer retention metrics to measure the success of their strategy. The main number teams pay attention to is the customer retention rate. Based on the number of customers you have, the industry you’re in, the state of the economy, and many other factors, the retention rate of your business may be different compared to other companies.
Before you dive into a spreadsheet and become overwhelmed with retention rate formula excel options, take a step back and do some research. The best place to start is finding the average customer retention rate by industry. You’ll quickly learn that, for example, the average customer retention rate restaurants shoot for is much different than the Salesforce customer retention rate. Why? There are different elements used in each industry’s customer turnover rate formula. Still unsure of which numbers you should be shooting for? Try sending out a customer retention questionnaire PDF to trusted colleagues and experts in your industry. The more data you collect from those similar to your business, the more accurate you’ll be with a benchmark average.
Simply put, the customer retention rate formula includes the number of customers at the end of an amount of time, number of customers won during that amount of time, and number of customers at the start of that time period. First, subtract the number of customers acquired from the number of customers at the end. Then, divide that number by the number of starting customers. Multiply by one hundred and you’ll have a basic percentage. Of course, many other numbers and variables can be factored into a formula or percentage like this. Variables within the insurance retention rate formula may be different than other types of businesses, like ecommerce. Curious about how to calculate customer retention rate in ecommerce? Factor in variables related to ecommerce, not insurance. In summary, choose a formula and numbers that are closely related to the nature of your business.
Customer Retention Examples
Once you have a strategy, a system of measurement, and tools or technology needed to scale or support the team, start brainstorming ideas on how to execute the plan! Need creative ideas for customer attraction and retention? See what other successful teams are doing! Customer retention examples can inspire your team to adopt that same approach or modify it a bit and customize it specifically for your customers. Where do you go to find these examples? A customer retention PDF or customer retention PPT is a great place to start! Especially if those resources include many different examples of how teams market to, interact with, and delight their customers with wonderful service.
“Surprise and delight” is a common theme you’ll see with the best customer retention company examples. Make your customer look like a rockstar! Be a resource for them and provide value in a way that allows them to advance their career with your product or service. And “check in” or schedule calls throughout the year or quarter, not just when you need a renewal or more money from them. For content, pass along best practices, benchmark reports, or case studies of other successful customers. If they’re speaking on your behalf at an event or educational session, pay for their flight and hotel! Or just surprise them occasionally with something in the mail, even if it’s just a handwritten note thanking them for being a customer with a gift card to their favorite restaurant or coffee shop.
Also refer to credible resources for pricing and packaging customer retention strategies. Case studies of teams doing it well will show you that they don’t surprise their customers with a price increase or force them into a new contract that’s against their best interest. Another good source for customer retention strategies? Slideshare presentations! This will often show specific examples (email templates, kickoff call agendas, renewal call talk tracks, etc.) that can help inspire your own team.
If you’re looking for more resources that cover the economics, consider reading a customer retention study. This type of resource will have numbers, played out scenarios, and even spreadsheet templates that can help guide your team on revenue goals and KPIs. There are analysts and journalists dedicated to this topic, and spend hours putting together a customer retention research paper that shows the latest trends from the most successful client success teams.
Importance of Customer Retention
How critical is customer retention to a business? It’s a key lever to a company’s growth (especially for software companies) and stock value. About all else, the importance of customer retention translates to happy customers who find value in your product or service. There are many benefits of customer retention, but that is by far the most rewarding in terms of team morale and your overall company mission. Still need convincing? Check out a “benefits of customer loyalty” PDF or “benefits of customer retention” PDF and you’ll read the same thing. There is nothing more beneficial (or damaging) to a company than customer retention. Why? Because it’s easier to keep or retain existing customers than acquire new ones. The economics of customer retention will tell you it’s cheaper too!
A “importance of customer retention” PDF or “importance of customer retention” PPT will also tell you how happy customers that keep renewing ultimately build up your company’s brand. The strongest indication of a company’s brand, service, and overall brand can be best reflected on third party neutral review sites. Check out a review site like G2 or Capterra and look up the customer reviews for a particular service or good you’re currently evaluating. This is the best way to see a preview of their customer retention process. It’s unbiased, the reviews are from real customers, and usually the number one theme or topic you’ll see is about customer service (or lack thereof).
Finally, you don’t have to search through an “importance of customer retention” slideshare to realize how customer retention can boost the valuation of a high-growth company. Venture capital firms, investors, and bigger companies alike all reference churn or customer retention as a strong indication of success with your business. Are you part of a start-up or fast growing company that looks to be acquired one day? Pay close attention to this number. If you can keep it at an impressive level, you will stand out amongst other growing companies.