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Why great experiences are key to customer retention and increasing your profits

May 10, 2015 January 7th, 2023

I recently gave a talk at a company about customer retention. This company has been experiencing rapid growth and their energy has been mostly focused on customer acquisition.

With aggressive sales and revenue targets to achieve, it’s natural that these numbers would influence the roadmap of their digital channels. However, companies should not neglect customer retention in favour of acquisition.

What is customer retention anyway?

How many times have you seen a customer lifecycle diagram? As a reminder, this is how a typical customer lifecycle looks like.

It is important to look at it as a perpetuating cycle of increasing customer advocacy through a series of touchpoints where the objective is to build, maintain and grow a base of loyal and advocate customers.

Building loyalty and advocacy starts with the first contact you have with a customer and continues throughout the entire lifetime of the relationship.

Each stage of the customer journey is a key touchpoint and opportunity to engage with the customer, add value, provide great experiences and increase retention.

To turn customers into advocates you should focus on your customer needs and aim to exceed their expectations.

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It’s about putting customer value rather than maximizing profits at the center of business strategy.

Frederick Reicheld, The Loyalty Effect: The hidden force behind growth, profits and lasting value

Ok, but why is it so important?

In a nutshell, the cost of retention is much lower than the cost of acquisition.

In addition to that, according to Medallia, increasing customer retention rates by 5% can increase profits anywhere from 25% to 95%.

Now imagine if you lose a key customer? Achieving your targets could become even more challenging due to missed opportunities and increased acquisition costs.

Now we’re talking. How do we do it?

You can find several strategies in many articles on the internet as a starting point. There is a lot of relevant information out there that can help you get started.

At Hello RS, we believe the following 7 strategies to be very important:

  1. Know your customer: work closely to your customers to understand who they are and learn more about their needs, motivations and frustrations. Get them involved in early stages of your product or service to validate market fit and desirability.
  2. Build trust: there is no loyalty if your customers don’t trust you.
  3. Set client expectations early: surprises are not always welcome and can negatively affect their perception of your services.
  4. Be proactive: instead of waiting for problems to occur, a proactive company can eliminate problems before they happen.
  5. Make use of automation as long as it’s not detrimental to your relationship with your customers: automation tools allow for time-consuming tasks requiring manual intervention to be standardised into repeatable processes.
  6. Measure customer satisfaction: build KPI’s around customer experience and conduct regular customer research.
  7. Exceed expectations.

By taking a customer-centric approach you should be able to find a healthy balance between acquisition and retention when prioritising your product roadmap.

Cover photo by Morgan Sessions

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