Customer retention is at the core of any successful subscription business. An interesting aspect to customer retention is that even small changes to the process can have dramatic results. Bain & Co. estimates that increasing your customer retention rate by 5% results in a 30% increase in profits. Here are a few ways you can improve customer retention:
1) Track customer retention and churn in a way that helps you understand the root causes
Many businesses track churn, but they often use it strictly for financial reporting. To dig into customer retention consider adjusting your reports to include the following:
2) Assign executive ownership of customer success
Subscription companies with low churn rates place a high value on customer success. It’s not just the responsibility of one department – the company culture embraces customer success and thrives on it.
That being said, you still need an executive to be accountable for customer success and have ownership of customer retention KPIs. For some organizations it’s the VP Customer Service while others might assign ownership to the Director of Marketing. Whomever you choose, make sure they have the right resources on their team to achieve the goal.
3) Understand how customers interact with your product
Sometimes this is called customer monitoring, or customer engagement – whatever term your company uses, customer interaction is a vital component of the business.
Monitoring customer engagement is about tracking customer activity before they cancel their subscription. It’s about identifying the customer who are at risk of leaving so you can take steps to re-engage with them.
You can collect this information from your servers by installing a java script to track individual activity. A good way to focus your tracking is to look at:
Once you enable tracking, take the time to score your customers on key performance indicators. For example, you can determine how much time the average user who renews their subscription spends on your site, then make that number a baseline to score all your customers against.
Then put triggers in place to notify the customer success team when an individual customer is below the baseline so they can reach out via phone and email to try and re-engage the customer.
4) Build a product that customers love
If your product isn’t quite right and doesn’t quite meet a customer pain point, then it is going to be very hard to retain customers. With the subscription business there are three product design areas to consider:
The consequences of customer retention can compound over time, and sometimes in unexpected ways. Even a tiny change in your process can cascade through the business and impact long-term profit and growth. So make sure to take some time to understand how your company handles customer retention and implement changes carefully.