The reality was staring me in right in the face, as I peered at our Year on Year sales numbers.
I was seeing more GROWTH from EXISTING customers … than I was achieving by closing NEW customers.
Software license renewals were going well…
Now, making MORE FROM.. and indeed GROWING … existing accounts is the holy grail and the bread and butter of any mature product line, such as mine.
But hold your horses !
What about that brand spanking new product line that you just launched?
What about Start-Up businesses just starting to get off the ground. Businesses that are striving to show a strong “up and to the right” revenue growth trend ?
Should they focus on existing customers … or upon closing new customers?
You see, there’s a shift in your sales and marketing approach that you need to make.
Indeed, a Bain & Co. and Harvard Business Review study estimates a 5% increase in retention results in 25% – 100% increase in profits
The answer is that you need to strive for retention right out of the starting gate
… Ingrain a customer retention program in your day to day operations and do it as quickly as possible, at the same time that you are busily growing your new customer base.
Let me ask you this.
Do you have a customer retention problem?
First, consider this…
Bain and Company calculates that
Customer acquisition cost (CAC), that is, the cost of attracting and closing a brand new customer, is 6-7 times more than the cost of retaining an existing customer
Let that sink in
it’s 6-7X cheaper to keep on making money from an existing customer than it is to close a new customer. Yikes.
According to Invesp,
The chance of selling to an EXISTING customer – the chance of either up-selling or cross-selling, is at least 60%
… While the chance of selling to a NEW prospect is < 20%
Well… for starters, existing customers are 50% more likely than new ones to try a new product that you sell
And, as a sales professional and a brand, you have contacts within, and a reputation of trust with, your existing customers.
And, to cap this off, there are clever things that you can do – integrations and bundling, for example, that can make an incremental sale very attractive to your existing customer.
Third … Consider this
Yes – The elephant in the room – “CHURN”
CHURN is the very act of LOSING a percentage of your existing customers … or losing portions of your customer’s business …. over time, after you have spent time, money, and sleepless nights acquiring them.
Churn is a big problem in SaaS companies, especially if you operate a subscription-based or Term-based license model.
Churn is a challenge in the hardware systems business too, where your customer may revisit who their vendor is, when they migrate their design and manufacturing to a next generation product.
Especially if your competition makes the migration path easy.
Put quite simply, when you lose a customer or they renew but the deal size shrinks (CHURN), you are faced with having to replace an existing revenue stream – You have to acquire a new customer or grow an existing customer to just keep revenue flat.
And CHURN is costing your bottom line more than you think.
Exactly how much is CHURN costing you ?
And exactly why is it important to take action to stop churn, sooner rather than later?
Let’s run some CHURN numbers !!
Suppose your pricing stays flat over a 2 year period, and your retention program magically cuts annual churn rate back by a mere 5% per year.
What’s the immediate result ?
Easy – You boost your revenue by 5% … in year 1
But what about next year?… Well, the picture gets even rosier.
Because that 5% COMPOUNDS, year after year after year.
Year 2 comes along and your retention program is still merrily rescuing 5% of your revenue Year On Year
After Year 2 completes, cumulatively your annual revenue will be boosted by
+11% of the business that you had at the beginning of year one – (5% times 5%) …
+5% of all new business that you closed in year 1
The icing on the cake?
After year 2, you will be sitting on well over 1/10th more business, all without lifting a finger to close a single new customer.
This kind of phenomenon more than explains a Bain & Co. and Harvard Business Review finding. In their study they estimate that a 5% increase in retention results in a 25% – 100% increase in profits.
Your mileage will vary, of course.
But food for thought, right?
So why not put a focused customer retention program in place right now?
What does it involve?
The truth is that we all do some customer retention activities daily – development and technical support, checking in on the customers
… But we also get caught up in lead generation activities and the tension of closing new business because of quarterly sales quotas.
Meanwhile, our existing customers are hungry for help, whether or not they ask.
And when renewals are due, that ONGOING HELP will be like money in the bank. It will have made the difference between a shrug… where you might get the renewal …and loyalty where the renewal and expansion opportunities are in the bag
Loyal customers are willing to pay well out into the future for a continued GREAT CUSTOMER EXPERIENCE , if you show them how to get more out of your products. If you make it your mission to judge your success by there’s
Look at how people love the convenience of online retailers that ship at no extra cost and fast. That give them their money back, no questions asked, if the product does not arrive.
How people love it when they are stuck and get help and answers right away.
While you are striving to get new customers – Heck, you don’t want all eggs in one basket when it comes to customer revenue –
… you, and your team seriously need to shift a good chunk of your time to customer retention activities … and to existing customer growth.
What you need is a deliberate CUSTOMER RETENTION PLAN
Shift your marketing programs
Shift your daily interactions and outreach
Do this now, even if you are a small company
Do it, even if you are launching a new product.
It will cut churn and grow customer lifetime value faster than if you purely chase that shiny object new customer.
Let me get you started with some specific actions …
These are not going to inundate you with more work than I you can handle this quarter.
They aren’t going to divert you away from my big accounts.
Indeed, they will give you more fodder to share with all accounts.
Read on and use the rest of this article to pick some ideas that work for you…
And while you are at it, be sure download this WORKSHEET
This is a step by step guide will help you build a deliberate program to retain and grow the sparkling and wonderful accounts that you already have.
EARLY SUCCESS – ONGOING VALUE – CUSTOMER EXPERIENCE – STICKINESS
Your Retention Program – What To Do Next
Retention is going to be one of your most significant revenue drivers
So where do you start?
I’d encourage you first to discover some answers …. Specifically
Why are your customers leaving or why do they think about leaving ?
In the most general terms, people jump ship because they don’t think you care (customer service and how you communicate are not prompt or helpful), and because the pain of migrating exceeds the switching cost.
Or they leave because you no longer best meet performance/cost needs …or necessary standards.
Inevitably you will lose some customers because their company gets acquired or it goes out of business.
Think about what they truly value. Your retention plan is going to give them more of it.
Hint: What a customer values – the thing you want to give them more help with – is going to depend upon their level of sophistication in using your product.. and their role.
Are they pushing the limits of your product? Are they using most or just 1-3 key features of what you offer? Are you meeting performance and productivity goals?
AT THE HIGHEST LEVEL, and with the help of the customer retention worksheet, you can now map out a plan
The plan is going to deliver 4 things to your EXISTING CUSTOMERS
These are (1) Early success (2) Clear and Ongoing Value (3) Great Customer Experience and (4) Stickiness
Let’s me explain.
Let me ask you this…
How do you make sure that your customers get started on the right foot?
Your single best investment here is an on-boarding tutorial.
By this, I mean A “QUICK START” EDUCATION ….
Your goal – to make sure that the customers start to use the product right away and has a quick success.
Your on-boarding tutorial guides them through migration. It guides them through an easy task that they are to complete.
Perhaps that task imports their old design or documents into your software, and then shows them how to complete a small project?
A QUICK AND EARLY SUCCESS is key
Offer on-boarding any time you hear that your customer has a new project
Any time that there is a new user
And any time that you release a new capability that is relevant to your customer.
See the end of the “How to make masses of Customers Happy” section below for tips on how to run a successful on-boarding program.
On-boarding is going to hook the customer so that they become an active user that accomplishes something right away.
Have you ever run a poll to ask …
What makes your customer competitive?
What results do they need?
Is our product MAKING IT EASY for you to get results?
It’s all about getting a customer
From A – the place where they sit today
To B – the RESULT that they want
When you ask customers these kinds of questions, they know that you care.
And their answers will guide your team as to how to best create a great customer experience.
A magical thing happens when you do this
You hear both complements and gripes – Topics for your content marketing team to cover to deliver help to customers
Inspiration for product improvement too!
CREATING A GREAT CUSTOMER EXPERIENCE
We are schooled in how “it’s not just the product – It’s the relationship” – when it comes to turning a customer into a fan.
What we are talking about here is the need to create a GREAT CUSTOMER EXPERIENCE.
Deliver something that answers the question of how to DELIVER ONGOING VALUE
Let me ask you this….
How well do you keep your communication channels open so that you can hear and help your customers en masse?
I recommend building a customer community, designed to help and share ideas and a great place to lead some live training.
What else can you deliver to this community?
In-depth Task-centric video training sequences, templates, swipe files, use cases, and shareable content.
Grow a database of Q&A’s and searchable training videos.
You can also create a membership area where you privately deliver valuable templates and training
Want more detail??
Check out the “RETAIN THE MASSES” section below and download the worksheet
Do you know what stops your customers from, gulp, swapping your product out and taking some of their business elsewhere?
From dropping you service completely?
Stickiness is the big thing that the customer has to loose
It’s the fierce risk and expense that a customer faces if they switch to a new vendor – or if they buy less.
Which leads to the obvious concept of SWITCHING COST
Does your offering have a SWITCHING COST ?
How difficult is it for your customer to drop you as their vendor?
Ideally, you want your product to be one that customers have INVESTED in and tuned to meet their needs – part of their process or identity.
Perhaps you provide a scripting language and the ability to build macros that add value… or enforce a process on top of your software?
Perhaps you provide code libraries, developer tools and software development kits (SDKs)… or intellectual property (IP) that work exclusively with your product?
Perhaps you have a fully supported and proven integration with other products that they use?
Perhaps they just love your customer community and the support and sounding board that it provides?
Think about it.
Think about partner strategies and pieces of extra value that you can add on the side …. that would make customers less likely to switch.
MAKE PROBLEMS EASY TO SOLVE
How To Retain Masses Of Customers
I had a dilemma and maybe you have seen this too?
When I looked at where my revenue was coming from, I had had a “long tail” of small customers, that together were responsible for just about half of my revenue.
This was not your typical Pareto situation where 80% of revenue was coming from 20% of customers. A long tail of revenue is more common than ever today.
I just had a lot of small customers. Startups that might develop into big accounts one day, and smaller outfits.
I had some big customers too and was on top of what they needed.
So let me ask you this …
How are you going to afford to keep customers, even those not in your top tier, happy? Retain the long tail of revenue in aggregate? Keep customer development and support costs reasonable?
You are possibly in the same boat that I was if you have hundreds of customers.
Especially if you offer a monthly subscription service.
For sure, there are not enough hours in the day to speak to and give individual attention to every small account.
And, tactically, there are quarterly sales numbers to meet, so little time to spare.
But here’s the thing.
Online digital marketing provides a great opportunity to reach customers all at the same time – one to many.
For me, it was time to redirect some effort to online digital marketing
But not in the sense of ads, articles, or pitches.
Let me explain
A big eye opener occurred when I started to run niched topic training webinars.
I had originally designed the webinars to target technical buyers and influencers in the telecommunications space – The content delved pretty deeply into technical methodologies … and showed actual use cases and examples.
What happened was that my sales team forwarded the webinar invitation to existing customers – because they figured that the webinar content could help them too.
Existing customers showed up in droves, hungry for the information.
Some attendees were brand new users that we didn’t even know existed … within my existing customer accounts.
That had not been on-boarded by us.
Some were experienced users that just wanted to get more out of our products.
One simple customer question in the webinar chat window would lead to a follow up sale.
If you are like me, you spend a lot of time, arming your sales team with sales collateral – presentations, videos, white papers, app notes, FAQs, webinars, sales cheat sheets… all oriented to closing new customers and beating the competition at their own game
What if, instead, you just targeted your existing customers with a modified version of these materials?
The sales collateral for existing customers goes a little deeper than it would for a new prospect. This is because existing customers have some familiarity with you and your products already.
The new collateral gives value to current users
New groups in the same company
Partners and consultants of that account
We decided to run an experiment – We’d stage an on-site Lunch and Learn Event for our big existing customer,
No pitch – Just product updates and training that showed them how to solve a specific problem that we knew that they had.
I’d take a white paper or app note and turn it into a customer training series and lunch-and-learn
And it worked. There was no question
… Lunch and Learns helped our customers
… and they helped us. These events were non-pitchy conversation starters
With the materials proven out, we’d run training webinars, designed to reach a broader number of smaller customers,
Our webinar chat window conversations would do anything from rooting out Frankenstein-sized roadblocks that the customer was frustrated about but hadn’t told us about
To identifying a new problem that we could show them how to solve.
Up would pop a nit-picky issue with the user-interface that they hadn’t felt was important enough to report… but that annoyed them 8 times a day.
That gnawed away at their desire to use my software.
And they weren’t alone.
The point of all of this?
It’s good to open up non-pitchy sales communication channels that HELP SOLVE PROBLEMS
Open one-to-many communication channels to the masses.. such as webinars and online communities groups.
When you do this, you will rescue a renewal. New opportunities and new buyers will surface.
Do this and you stop being viewed as a commodity that can be replaced at will
Do this and it shows that you care
What are some of the ways that you can create a GREAT CUSTOMER EXPERIENCE … To KEEP MASSES OF CUSTOMERS HAPPY?
1. Create a video training series. For example, take your top tier customer’s Lunch and Learn topic or grab a popular white paper and turn it into a Live Webinar, Facebook or YouTube Live, And reach the masses.
Your goal is to help customers get more out of your products and to adopt your products widely.
Teach customers how to INTEGRATE YOUR PRODUCTS WITH OTHERS.
This will lead to SYSTEMATIC USE of your product day in, day out… and make life highly convenient for your customers.
So convenient that they won’t want to switch.
2. Create an online challenge An online challenge is a place where you will coach a group of customers online to attain a shared goal privately if they so wish. To create their first deliverable using your software, for example
Challenges are great – They AVOID PASSIVE CONSUMPTION of your training …. so customers “learn by doing”.
Each training module has a task for your customer to complete, so that, at the end of the challenge, they walk away with a useful project done.
3. Create an Online Community Where you air and solve more problems.
Poll existing customers about what their biggest headaches are.
But a note of warning. What you don’t want is to only hear from the vocal minority… You want more of your audience to engage.
It is, for this reason, that an online community such as a Facebook group or membership area work well.
It is HERE that users help users and that your development and technical support teams can solve specific problems.
Try this first … Announce a YouTube or Facebook live Q&A … and ask what questions they would like to cover. You will hear from more people this way and more will show up
Here are some ideas that your customers crave, and that you can provide via your online community
- Use cases that are relevant to their niche
- Shareable content, Templates, code libraries, developer tools, intellectual property, scripts, macros… and editable examples that give new customers a head start and that let them hit the ground running
- Regular FREE Live Online training to keep customers engaged … and discover new opportunities based on questions that they pose
- “How to”Emails and Videos: Training that solve the biggest problems for each niche that you serve
- FAQs spawned and inspired by complements and gripes that you hear from your online community.
- News on your Integration solutions and from your ISVs and partners – Your ecosystem
4. Deliver an Online On-boarding training sequence
“Done with you” training that gets new users over the first hurdle… and a first success.
TIPS: You need to do on-boarding in a special way
- Your on-boarding tutorial must be TASK-CENTRIC, not feature-centric
- Think of on-boarding as a set of HOW TO tutorials that includes homework or quizzes .. to make sure that the customer LEARNS BY DOING
- Include a training module to migrate customers from their current solution to yours, quickly
- Pick topics wisely. On-boarding needs to show the customer, step by step, how to ACCOMPLISH A SIMPLE BUT USEFUL TASK that they care about.
- Keep the individual steps simple ….. To AVOID OVERWHELM. 5 steps or less is ideal
- And measure who views the training so you can intervene if they get stuck or don’t get started
Give every new user an on-boarding training sequence with a task or deliverable to complete.
⏬ OK… Let’s put these ideas into action ⏬
STOP LOSING MONEY – GROW REVENUE
Your Retention BluePrint
Startups, and companies small and large, make money when the OVER-SERVE AN UNDER-SERVED MARKET.
This article has shown you how to SHIFT YOUR FOCUS TO CUSTOMER RETENTION.
So that you over-serve masses of customers.
So that you stop losing customers, big and small.
Want to put this into action?
Download the WORKSHEET to build your own customer retention blueprint.
The worksheet breaks it down into a few simple steps
Have questions or ideas on how I can make this article better ? Feel free to COMMENT BELOW
Your CUSTOMER RETENTION BLUEPRINT
How to keep customers, keep them happy and grow customer lifetime value (CLV)
On-Boarding Training, Migration Automation
CLEAR ONGOING value
Get More Out Of Your Product
GREAT customer experience
Communities, FREE Task-Centric Training,
Ecosystems, Integrations, APIs, SDK and Platforms, Code Libraries, Shareable Content
WANT TO DO MORE? TRAINING