Everything You Need To Know To Boost Customer Retention


Marketing is all about getting new eyeballs on your site, and new feet in the door, right? New customers are what we’re after!

Except gaining new customers is expensive. Keeping your current customers isn’t.

A mere two percent increase in customer retention, for example, reduces your costs by 10 percent.

You’re better off putting more focus on keeping customers who currently support your business than chasing after those potential ones who don’t.

It’s important that you understand that truth or else you’ll make the mistake far too many business owners do by balking at the effort and apparent cost of retaining your long term customers. Letting your current customers slip away because you didn’t understand how valuable they are is bad business.

Why Current Customers Are Worth More

It’s easy to get caught up in the fascination with potential customers, those customers you don’t have now but want to attract. Most businesses focus on getting new customers with their advertising and PR unwittingly isolating current customers.

Putting a majority of your focus on customers you don’t yet have is harming your bottom line. Consider the data collected by the Fonolo blog that show that 70 percent of customer buying experiences are based on how a customer feels they are being treated, with 86 percent willing to pay more for better treatment.

When your focus is solely or mostly on the customers you don’t yet have, your current customers often suffer in how they are treated. And that makes zero sense. You spent so much money to get the customer; why wouldn’t you focus on them know that they are here?

When customers leave, your profits take a hit. Even just a small reduction of 5 percent in customer defection boosts your profits between 25 – 125 percent! (Leading on the Edge of Chaos: The 10 Critical Elements for Success in Volatile Times, by Emmett Murphy, Mark Murphy)

Improve Your Customer Service. Now.

The top reason that customers leave a business is when the service they receive is terrible.

In 2013, a survey discovered that 62 percent of customers left their service providers due to poor service. It wasn’t price. It wasn’t product selection. It wasn’t location. It wasn’t the hours a business was open. It was poor customer service that made more than half of them leave!

By 2020, customer experience will overtake price and product selection as a reason to choose one brand over another.

Where are business failing in regards to customer service? According to a Global Consumer Pulse Sudy by Accenture:

  • 91% of customers get frustrated because they have to contact a company repeatedly for the same problem (Problem: poor communication, lack of resolution)
  • 90% of customers are frustrated when they are put on hold too long (Problem: understaffed support center, poorly trained employees)
  • 89% of customers are frustrated when they have to repeat their problem over and over to multiple representatives as they move through your support chain (Problem: support chain and system too complex and unwieldy, lack of personal attention to individual customers, customers are seen as their problem that needs solving instead of as people)

Price and selection are not the main goal.

Think of what most businesses focus on. They lay claim to the best prices, the best selection — but they’re missing the point. Customers might arrive because of a price point or because of selection, but they stick around because the service is good. Period.

This is good news for a small business that maybe can’t compete with a Big Box store. Even without the huge selection or rock-bottom prices, they can make up for it in leaps and bounds with service. For small businesses especially, who have managed to gain a customer in spite of an inability to compete on price and huge selection, excellent service can keep them in play.

Good service means surpassing expectations.

Good service means going above and beyond. It isn’t merely meeting the bare minimum of what a customer expects, but involves delighting a customer.

It’s that moment when a customer is in the store and a free surprise is thrown in the bag, or the repairman comes back to fix something a week later free of charge, taking responsibility for missing something on the first repair job.

Good service means:

Being personal. Personalize your customer’s experience. Keep a file so that you know your customer’s preferences and details from previous encounters. This allows you to offer recommendations that fit them, or to provide service based on what they have and need instead of coldly getting them to fill you in on necessary details each time. Send birthday cards with coupons. Let them know of a new product they would be interested in. Greet them by name when the come in the door. Be personal, and show that they matter to you as a person.

Owning up to mistakes. Whether you didn’t do the repair right the first time or made some kind of mistake, own up to it right away when a customer confronts you on it. Then, offer to make it right at no charge, preferably adding a bonus of some kind to let them know their business matters to you. Good service does not pass the buck or blame the customer.

Trained employees. Your employees are the face of your customer service. They need to be trained not just in the knowledge of how to do their job, run specialized equipment, or make the sale, but also how to work with customers. Key skills that your employees need, according to Help Scout, are:

  • Patience. Customers arrive in front of your employees frustrated, upset, angry, happy, confused, curious — just about any way imaginable. Employees have to be patient as they try to figure out what customers need and want, separating and extracting that from the emotional wrapping it arrives in.
  • Attentiveness. There is nothing more frustrating than an employee who is distracted and not paying attention to the customer. Your employees must know that when a customer is in front of them, their friends, phone, or coworkers antics don’t exist. Only the customer, and what they need, exists. They must see it through to the end without being distracted. Customers pick up on this right away, and it is a particular challenge with younger workers who want to have fun with coworkers or spend time on their mobile phones more than they want to help customers.
  • Communication. Customers don’t always speak clearly about what they need or want, and it takes a well-trained employee to be able to communicate with such a person. Communication is both re-wording and summing up what the customer wants as well as explaining the options available. Employees also need to communicate billing and sales clearly so that customers aren’t shocked when a bill arrives. Purposeful tricky communication might make for a one-time larger sale, but that customer will never come back after feeling “cheated.”
  • Knowledge. Customers expect you and your team to be the most knowledgeable about what you are selling. If a customer asks your employees a question and can’t receive a direct and helpful answer (or isn’t taken directly to someone who can help in a timely manner), they will go elsewhere. After all, why buy from a business that doesn’t know much about what they are selling? It suggests that any future needs, such as repair or follow-up, might go poorly.
  • Positive language. Being able to frame a negative into positive language is a must. Instead of telling customers “we don’t have that in stock”, employees should learn to put a positive spin on it and say “we can order one for you and have it delivered in a week.” Even if the customer doesn’t bite for the offer, they won’t feel like your business responded with a “no!”
  • Acting. Anyone who has worked with customers knows that some days, you’re just not into dealing with people. That’s where acting ability comes in (and a good policy for giving your team breaks). Employees have to act interested, patient, positive, and helpful, even if they don’t feel it. No customer wants to feel (or hear about) the personal negativity of one of your employees.
  • Emotional intelligence. Employees need to learn to read customers. Some customers are having a bad day, and need to be handled differently depending on how they feel or their personality (e.g. want help, want to be left alone to decide).
  • Customer-focused. In addition to Help Scout’s list, I’d add that employees have to remember it’s not about them. Keep your employees from talking too much about themselves, sharing too much about their personal life, or hogging the conversation. Customers get frustrated when they are merely trying to make a purchase or do business and an employee chats them up or burdens them with their life.

Excellent customer service is one that is painless to customers. The entire process of finding, considering, questioning, and ultimately purchasing is done without hassle or struggle. Anything that creates a snag in the process is a problem point you need to work on with your team.

Too often, in a world where excellent customer service is lacking, good service is seen as meeting the bare minimum. If you can do that, you’re at least not disappointing the customer, the thinking goes. But meeting a customer’s expectations isn’t the customer service level that will set you apart from your competitors; your low level of service can easily be exceeded. Going far beyond the customer’s expectations is good service.

Customer service matters in online reviews.

These stats of customer behavior based on customer service are growing every year. Angry or annoyed customers in this current age can not only leave your business in the rearview mirror, but they can write a review of your business online and possibly hurt how many new customers may try you out in the future. Check out those online reviews — not just yours, but any and all — and realize that most of them are about customer service, not product or price. Rare is the negative review for a business that complains about a broken product. You’ll usually see such a review that might mention the product didn’t work but how wonderful/terrible the company backed it up in service. Even in restaurant reviews, where the food and the ambience should be the most important, you’ll see reviews based on how a server treated a table.

When word gets out about stellar (or poor) customer service, people can easily read about it on their phone and shift allegiances. Customer service generally trumps product selection and price.

Make It Easy To Buy Again

Making it easy to buy from you again is an obvious way to keep your customers returning. This might include:

  • Subscription. Certain products and services do well with a subscription setup. The selling point is one of low-hassle. The customer doesn’t have to remember to buy the next time; you’ll handle it instead, and get the product to the customer on a regular basis. The rise of subscription boxes (e.g. Graze, Birch Box, etc.) shows that this is an appealing approach for many customers. Plus, a subscription keeps your brand in front of your customer on a regular basis.
  • Bonus or samples. Adding bonus content, free samples, or other extras at no cost is both a surprise for the customer (remember: delight the customer) as well as a good way to get customers to try something of yours that they might not otherwise have tried. They may like your sample enough to buy the product the next time around.
  • Upselling and cross selling. Offering related products (cross selling) or higher-end or additional products (upselling) is a good way to get customers who might not have considered additional purchases to do so. In order for it to work, though, the additional products have to truly add to the value of the original product, or have to be shown to be of higher value to the customer.
  • Loyalty programs. Loyalty programs reward regular customers. Loyalty programs can go wrong in two ways, though. The first is if you require too high of a purchase amount before getting a measly reward (e.g. “Buy 20 lattes and get 10% of your 21st drink!”). Loyalty must be rewarded sooner, and with something of value. The second problem is the pressure some businesses put on customers to join, confronting them at the point of sale on a regular basis, and gathering personal data. (We’ll talk about that in more detail in a bit.)
  • Website recommendations. If much or your sales or customer interaction comes from your website, take a page out of Amazon’s book and go strong with customer recommendations. It is similar to the upselling and cross selling that you might do in person at the register.
  • Referral programs. Reward customers who get their friends and family to become customers. Word-of-mouth recommendation is powerful; these types of recommendations are trusted more than anything you can put out. Create a program that rewards customers by offering discounts, cash back, exclusive savings, and so on.

One word of caution: customers face an onslaught of questions and pressure when at the checkout register or in online shopping carts to get brand credit cards, get additional products, upgrade, and so on. In your efforts to upsell or get customers to sign up for loyalty cards, you could very easily be harassing them to the point they avoid shopping there. Consider how you feel when you run into a store to purchase an item or two, and are asked if you want to save 10 percent by signing up for a credit card. It’s annoying.

Balance is the key. Not every transaction should have other offers bound to it. Rotate so the customer’s experience with that kind of upsell or loyalty card pressure is periodic at best, but not constant.

What kinds of barriers do you put in front of customers who want to buy again? Do you require them to know the part number they need for their particular product? Do you keep records on what they bought in the past or leave it to them to remember? Do you offer them a deal and reward them for coming back, or do you treat them as if they are always a first-time customer?

Removing the barriers to buying again is crucial to keeping your customers around.

Protect Your Customer’s Privacy

Old-school marketing tactics that infringe on privacy are not appreciated any longer (if they ever were).

Customers are tired of paying for products and services while knowing that their personal information is going to be used as its own product for the business to make money off of. According to studies, 82% of U.S. customers feel that they cannot trust businesses to wisely use the personal information they provide them.

While marketing playbooks may chide you for not making use of customer data for every and all purpose, people who are experiencing privacy loss on social media and online are weary of it. They are not thrilled to hear that every purchase they make at a store might be data sold elsewhere.

  • Only collect information you need. When signing up for a loyalty card program at the register, no customer should be asked extensive questions that clearly reveal an abject database collection process. Any information you collect beyond the bare minimum feels like an invasion of privacy, and turns customers off. Do you really need to know their income level in order to offer them coupons? Of course not. That kind of data is clearly needed for some other purpose beyond loyalty rewards.
  • Respect a customer’s wish to be anonymous. Asking for a phone number at the register first thing is frustrating to customers who protect privacy. A better question might be “are you a member of our loyalty program?” Forcing a customer to deny the phone number is an opt-out approach (we’ll talk about that next) that can be uncomfortable to customers who simply want to buy without confrontation or the additional weight of decisions at the point of sale.
  • Take an opt-in approach. Separate data collection from loyalty programs, or the simple act of making a purchase. If you want to collect data for other purposes (e.g. research, targeted marketing), it needs to be opt in, not opt out. Use surveys and other bonuses to get people who want to participate involved.
  • Post a notice that explains how their information is used. Make it clear to customers, both in stores and online, how you will use the information that they give you. Use normal language; obfuscation in language makes you look bad.
  • Promise privacy, and keep the promise. When customers sign up for mailing lists, let them know you aren’t selling their email or postal address to anyone else. And then don’t sell it. How frustrating it is to subscribe to a magazine, for example, and in the next month be flooded with junk mail related to the topic and realize the magazine took your subscription money and also sold your name to a mailing list.

The problem with collecting so much data, particularly at the point of sale, is that you force customers to make decisions when the only decision they should be making is to buy. With websites, it is easy for customer to walk away from their cart if the pressure is too much. In stores, it is uncomfortable and customers won’t forget that when they consider where to buy next.

Have Great Selection, But Reduce Choices

Too many choices can paralyze customers.

A well-known study involving jam revealed that people were more attracted to the large selection, but when it came time to actually buying something, a smaller selection fared better. Customers like the idea of having lots of choice, but they don’t do very good with making buying decisions in those settings.

What business doesn’t like to lay claim to having a huge selection, though? That’s likely a huge selling point. You can still have a great selection — and attract customers — while making it easy for sales to happen.

  • Bundle products together. Which products are related? Which products to customers tend to buy together? Which products go well with others? Creating product bundles reduces the amount of decision making a customer has to do. They don’t have to decide between 12 items, for example, but instead between four sets of three items. Include the incentive to save if customers buy a bundle, and you have a winning combination.
  • Feature items regularly. Whether featuring products prominently online or in your store, or highlighting them in an email newsletter, help customers discover great products that they might not otherwise find. Bookstores will often have displays which feature books around a theme; this helps customers find books they might not have found otherwise and encourages sales for those who are overwhelmed by shelf after shelf of books.

Keep your great selection but reduce the weight of decision making for those customers that need a bit of help.

Use Email Marketing

Email marketing is a powerful tool. The Direct Marketing Association discovered that for every $1 you spend on email marketing, you get a return of about $40. That is an excellent ROI!

It’s not just a great ROI that makes email marketing so powerful, though. Much like product subscriptions, a regular email newsletter keeps your brand in front of your customer’s eyes and helps them to remember to buy your products or use your services.

The most successful email marketing approach, though, will be customer-oriented, i.e. helpful. This means you must be thoughtful in how you collect customer information as you create your email list. A mere email address is not enough.

  • Segmented lists. Segment your master list into groups of customers based on interests, products they use, and so on. This helps ensure that you send them the most helpful information possible. It feels personalized. You might create these segments by asking what their interest are when they sign up for your email list or sign up in the store.
  • Helpful ratio. Most of your email should be helpful, and not just self-promotion. Provide coupons, helpful content, links to your most useful blog posts, or exclusive content or deals only available to your email subscribers. Most of your email should be helpful, and encouraging sales passively rather than aggressively promoting “buy buy buy!” Show customers you care about them as a person.
  • Be personal. Use the customer’s first name in the email. Use past purchases to recommend customized future purchases for a segment. Send out coupons or exclusive deals for birthdays or the anniversary of their first purchase from you. Show your customer you’re paying attention to them as an individual.

Your emails to customers must be relevant to their individual interests, or your emails will be ignored.

Listen To Your Customers

It’s surprising how few businesses bother to ask customers what they think of their experience. Most businesses see customers as data points, particularly larger companies. Surveys that can be measured are all these larger companies can feasibly deal with, even if the customers have something important to say that goes beyond the limitations of a quick and generic survey.

But your customers have valuable things to say.

Gather customer feedback.

Do you have a systemized approach to gathering customer feedback? Most customers won’t offer it to you automatically (though now they will happily leave it in an online review for the world to see). Many customers who are dissatisfied never tell you; they just stop patronizing your business. That’s valuable information walking out the door. Don’t you want to know why they are leaving?

What you ask your customers will vary depending on what you are selling, but there are a few general questions you might ask, along with the specifics for your business:

  • What did they expect, and what did they actually receive?
  • Did they find what they wanted? Was it difficult for them to choose a product?
  • Did they feel pressured to do something they didn’t want to do?
  • Do they feel confident about their purchase?
  • Did they receive the help they needed?
  • Was the product/service what they wanted?
  • Was the price what they expected?
  • Was support or customer service helpful during and after the purchase?
  • Will they come back? Why or why not?

How you gather that customer feedback matters, too. Go beyond the rote survey tacked onto the end of a receipt that customers are so used to now (and so wary of; see data collection and privacy section), if you can. You might consider:

  • Talking to them in person or directly through a one-on-one email.
  • Having a dedicated space on your website that allows them to give you feedback.
  • Having customer appreciation nights and give them a chance to let you know how you’re doing.
  • Providing a suggestion box in the store.
  • Allowing customers to communicate privately or anonymously. Not everyone is comfortable complaining.
  • Create a focus or beta testing group before launching a new product and encourage honest feedback.
  • Have customers involved in testing out products, store setups, or soft launches and gather their feedback before actually launching.

Gathering customer feedback should not be onerous for the customer. Remember, you’re avoiding barriers to purchase. Even if the feedback request comes after the purchase, they’ll avoid future purchases if they know there will be a burdensome survey every single time.

The Square app that is so popular for credit card payment emails a receipt that lets customers click on a smiley or frowning face so that customers can let them know how they felt that transaction went. A further detailed survey is available, if they want to participate, after selecting one of the faces. This respects your customer’s time, instead of loading them down with a huge survey, and makes it easy to determine the general feelings a customer has toward a business right within their Square dashboard.

Whatever you decide to do, create a system that allows customers to talk to you, rather than forcing them to get necessary satisfaction by venting and talking only online to the public instead of you. You can learn so much, even in the middle of a rant, if you really listen to what set a customer off or what made them happy.

And, of course, reward customers for participating in any kind of feedback program. Their time has value.

Understand the data.

Customer feedback, and any other similar customer-related data, are only useful if you understand what it is telling you. Inc.com suggests three key areas where data should be applied when focusing on customer retention:

1. Customers with one foot out the door. Some customers are on the verge of leaving. You want to identify who those customers are before they leave. Software apps often use “adoption” as a standard, i.e. if a user hasn’t shown heavy use of the product, they haven’t made it a crucial part of their workflow (adoption), and are likely to not stick around. For other businesses, identify signals of customers who are drifting away. Perhaps the regular orders have decreased in total, or they don’t come in as regularly. Maybe you expected to see the customer a typical time of the year and they didn’t come in. Perhaps the customer’s account shows a lessening in purchases, or an increase in customer support contact. Whatever it is, identify customers who are leaving (or have left). Find a way to sweeten the pot and offer them an enticement to come back.

2. Pinpoint where customers struggle. When customers struggle to use your products or services, they just as often leave and find something comparable that doesn’t have the struggle. Any pain point causes them to leave; we all, after all, tend to choose the path of least resistance. Talk to support staff and customers. Find similar complaints. How can you fix that problem? Perhaps you need to offer free classes or training on using your products, or you need to make it easier to book your services. Maybe your website is clunky and getting in the way and you’re losing sales there. Use the data available (or set up a system to begin collecting it if you don’t have any data) to learn where customers give up.

3. Find your most loyal customers. Do you have a few customers who absolutely love what you sell or do? Turn them into brand advocates and cheerleaders. Reward them for honestly spreading the word. Have a plan or system in place for these extremely loyal customers so that the moment you identify them, you have an action and a reward ready for them. Many customers are honored to be asked by a business they love to be part of the success story.

Avoid making assumptions.

One of the reasons that listening to your customers and understanding the data is so valuable is that it helps you avoid making assumptions about them. Content marketers are always harping on “knowing your audience”, but the same can really be said for anyone who is trying to turn leads into conversions (sales).

Where might you be making an assumption?

  • Understanding underlying problems. Do you really understand what a customer complains about? They might be telling you it’s because of Problem X, but in reality, they are frustrated with something else. Perhaps they bought a product for you that didn’t really fit their needs or skill level, and they can’t understand it. So they are constantly running to you for support. Perhaps the solution isn’t fixing the problem they bring to you, but fixing the larger underlying problem: bad product-customer fit.
  • Poor recommendations. Recommendations necessarily rely on crowdsourced assumptions when using technology, but in a store, your recommendations need to be personalized. Sales staff that are pressured into always pushing an upsell may be leading customers to products they aren’t going to like (and will be upset about later).
  • Feature creep. For software and SAAS businesses, feature creep inevitably happens because you think you know what your customers want. You get caught up in the idea that “improvement” means “new features” instead of “better speed” or “better design.”

Do you know what kills assumptions?

Listening to your actual customers and understanding the big-picture data.

Have Great Products And Services

Though we’ve highlighted the things that surround the reason customers come to you, the actual product or service you are selling still has to be high-quality. Shoddy products might be forgiven once if repaired and replaced, but a continual experience of poor products and services sends customers packing.

Know your customers.

Look at your feedback. What are customers telling you they like? That they don’t like?

Talk to your sales and support staff. What are they hearing from customers? What kinds of questions or problems do customers tend to have? What requires the most support?

If you offer the best Widget A, but your customers want Widget C, Widget A is not going to help your business. You need to always be in a state of fine-tuning what products and services customers are actually looking for, what is or isn’t selling, and where the trends are headed.

This last section almost feels like an afterthought — having a product or service worth the money that customers might buy ought to be a given. Unfortunately, some businesses spend a great deal of money and focus on PR and marketing to make up for a less-than-great product or service, convincing customers to buy in on hype alone. Those businesses, however, will also have shockingly low customer retention numbers, with a heavy focus on getting new customers constantly. Their customer churn is extremely expensive in the long run.

Remember: customer retention saves money and increases profits. If your bottom line is your only motivator, that statement alone should convince you to take customer retention practices seriously. Customer retention isn’t “sexy” or as exciting as the pursuit of brand new customers, but it’s where the money is made.

Everything You Need To Know To Boost Customer Retention