• Importance of customer retention
• Understanding churn
• Are you targeting the wrong customers?
• Strategies for successful customer retention
• 1. Engage with your customers
• 2. Proper onboarding
• 3. Monitor ‘Customer satisfaction’
• 4. Implement ‘Customer Health Scoring’
• 5. Track, optimise, and communicate customer ROI
• 6. Create a better customer service experience
• 7. Engage and educate Customers through ‘Retention Marketing’
• 8. Build a ‘Key Account Management’ program
• In a nutshell

Importance of customer retention

In the race for business growth and success, the spotlight often shines brightly on acquiring new customers. However, amidst this pursuit, the foundational importance and immense value of existing customers often get overlooked. Losing acquired customers after investing significant time and resources into acquisition strategies is counterproductive. Several compelling reasons underscore why existing customers are the true goldmine for sustained business success:

• Cost-effectiveness: Retaining current customers is markedly less expensive than acquiring new ones, with acquisition costs often ranging from 5-25x higher than retention expenses$^1$.
• Up-selling Opportunities: Existing customers are more receptive to additional purchases, being already acquainted with the offered products or services. They are approximately four times cheaper to market to and more likely to buy, contributing to increased sales at lower marketing costs.
• Referral Potential: Loyal customers serve as an invaluable referral source, actively recommending businesses to their network. Leveraging this customer base can lead to a self-sustaining cycle of referrals and expansions.
• Enhanced Revenue: Higher retention rates not only secure ongoing revenue but also facilitate more cost-effective marketing, increased customer lifetime value, expanded up-sell opportunities, and a surge in referrals. Even a marginal 5% increase in retention can yield a substantial 25-95% boost in profits.

Moreover, losing customers doesn't just impact a business individually; it inadvertently strengthens competitors and weakens a company's market position. Given these implications, prioritising customer retention becomes imperative for sustained growth.

Understanding churn

Understanding the causes of churn in B2B businesses is crucial. Reasons could range from issues like incorrect targeting, unmet customer expectations, and inadequate support, to an imbalanced focus between acquisition and retention marketing contributing to customer attrition. Understanding the fundamental causes behind customer churn serves as the primary step towards bolstering customer retention. By delving into these root issues, businesses can effectively address the underlying problems rather than simply treating their symptoms.

How do we do that? Simply, start by measuring your retention rates. Measuring retention rates provides a clearer perspective on the factors contributing to churn. In the realm of B2B businesses, three primary issues account for a significant portion of churn, each of which warrants detailed exploration:

1. Misaligned Customer Targeting
2. Unmet Customer Expectations and ROI stemming from onboarding challenges, product-related issues, and evolving business priorities, among others.
3. Weak Customer Service and Support resulting in customer frustration and hindering the full utilisation of the product or service benefits.

Recognising and addressing these issues lays the groundwork for rectifying churn-related challenges and paving the way for enhanced customer retention strategies. We have a separate blog covering how to calculate churn for your business.

Are you targeting the wrong customers?

Attracting ill-suited customers from the start is one of the primary causes of churn. Misalignment on ideal customer profiles, inadequate qualification criteria, or pursuing customers outside a company's ability to serve often results in attracting the wrong audience. The repercussions of acquiring misfit customers are significant:

• Higher acquisition costs
• Increased service expenses
• Reduced likelihood of further purchases
• Elevated probability of leaving the business

That is why you need to ensure that you are targeting the right customer (see our article on ). Redirecting resources from misfit customers towards acquiring and supporting those the company can genuinely assist proves to be paramount.

Strategies for successful customer retention

1. Engage with your customers

Directly engaging with customers and comprehending their needs stands as a foundational approach to retaining their business. Employing targeted questions like "What would have to be true for you to find immense value in our product/service?" or "What factors might lead you to switch to another provider?" helps companies gauge customer sentiment. These questions pave the way to understanding and addressing potential pain points and concerns before they lead to churn.

Successful companies adopt a diligent and systematic approach to comprehending their customers' needs, going beyond mere listening to truly understanding their perspectives. Businesses utilise various formal and informal channels for this purpose. While surveys, customer panels, and usage studies are formal avenues, informal conversations often yield profound insights. Engaging in relaxed conversations over coffee or a drink, armed with specific queries, unveils crucial details such as the original problem customers sought to solve, expected outcomes, and how well the product or service fulfils those expectations.

Doing this regularly brings to light potential issues or gaps that could trigger churn. It also allows you to take proactive measures to address their specific concerns before they escalate.

With all our portfolio companies which have a few key customers that contribute to the majority of revenues, we tend to have monthly or in some cases bi-weekly cadences. This allows the leadership teams to know first-hand the issues and put the fire out before it turns into a wildfire.

2. Proper onboarding

A robust onboarding program serves as a potent antidote to two common churn triggers: customers' lack of understanding about product usage and their delayed realisation of the product's full value.

Successful onboarding relies on setting clear expectations and delivering on those promises. Be prescriptive by laying out a clear road map for customers, detailing what to expect in terms of timelines and actions. Delivering on these expectations post-onboarding is equally crucial.

Crafting a well-structured onboarding program that systematically guides customers through the product's functionalities and showcases how to derive value swiftly is pivotal. Such a program minimises the time required to understand and leverage the product, reducing friction and mitigating the risk of churn.

3. Monitor ‘Customer satisfaction’

Keeping a close eye on customer satisfaction is crucial in proactive customer success strategies. Measuring satisfaction provides signals about customer progress toward their desired outcomes. Utilising metrics like Net Promoter Scores (NPS) and Customer Satisfaction Scores (CSAT) helps gauge overall satisfaction levels throughout the customer journey. However, it's essential to consider satisfaction at both user and decision-maker levels to grasp renewal likelihood accurately. You could use the scores as also a way to attract new customers who might be interested in existing user feedback.

4. Implement ‘Customer Health Scoring’

Preventing churn necessitates early detection. Recognising warning signs by comparing behaviours of churning customers with loyal ones helps identify common predictors of churn. Utilise these indicators to flag potential issues and act promptly.

Calculating Customer Health Scores involves the amalgamation of multiple data points and indicators that highlight the health or engagement level of a customer with the company's products or services. The exact calculation can vary based on the company's specific business model, industry, and the key factors deemed critical to customer success. However, it typically includes a combination of quantitative and qualitative metrics.

Some common components that contribute to Customer Health Scores include:

• Usage metrics: Tracking how frequently and extensively customers are using the product or service. This could involve login frequency, feature adoption rates, or utilisation of various functionalities.
• Engagement metrics: Assessing interactions with the company, such as response to communication efforts, participation in events or webinars, engagement with support channels, and involvement in community forums or discussions.
• Feedback and satisfaction data: Incorporating data from surveys, Net Promoter Scores (NPS), Customer Satisfaction Scores (CSAT), and other feedback mechanisms to gauge customer sentiment and satisfaction levels.
• Life-cycle stage: Understanding where the customer stands in their journey, including their onboarding status, duration as a customer, and milestones achieved.
• Support and service interactions: Evaluating the frequency and nature of support requests, resolution times, and overall experiences with customer service.
• Purchase or subscription behaviour: Analysing patterns related to up-sells, cross-sells, or any decrease in purchasing frequency that might indicate a potential churn risk.

Each of these factors contributes to a numerical score, and these scores are often combined into an overall health score or categorised into segments (e.g., low risk, moderate risk, high risk). Companies then utilise these scores to prioritise their efforts, focusing more attention on customers with higher churn probability to mitigate risks and retain them. This proactive approach allows companies to intervene with personalised strategies, whether it's providing additional support, targeted communications, or tailored offers to improve the customer experience and increase the likelihood of retention.

5. Track, optimise, and communicate customer ROI

Value-based selling emphasises linking the price of a solution to clear and measurable business outcomes. Understanding customer ROI perceptions and actively monitoring and optimising them aids in meeting customer expectations. Proactive action to realign ROI expectations and highlight measurable value further solidifies customer relationships and encourages repurchase or renewal.

6. Create a better customer service experience

Poor customer service is a primary contributor to B2B churn. Resolving issues promptly and enhancing service experiences are crucial in retaining customers. Understand current service levels objectively through data and feedback, then revamp service experiences by focusing on improving ease, speed, and enjoyment for customers.

7. Engage and educate Customers through ‘Retention Marketing’

Retaining customers relies on nurturing relationships through retention marketing. This strategy involves consistent engagement and value delivery at every stage of the customer journey. Establish trust, provide value, and maintain connections through various channels like email and personalised content to reinforce brand loyalty.

8. Build a ‘Key Account Management’ program

Recognise and prioritise high-value customers through a dedicated key account management program. Investing resources in these accounts helps retain and grow profitable relationships. Studies show that such programs significantly boost customer satisfaction, profits, and revenues within a few years of implementation.

In a nutshell

In the pursuit of sustainable growth, it becomes evident that retaining existing customers and nurturing their relationships is more cost-effective and valuable than perpetually acquiring new ones. The subsequent sections dive into proven strategies employed by successful investor-backed companies, offering actionable insights to fortify customer retention and achieve enduring business success.

Understanding why customers churn and proactively addressing those issues is akin to applying a watertight sealant to the company's leaky bucket, safeguarding against revenue loss and reinforcing a path to sustained growth and success.