Retaining and Attracting Customers: What Should Young Startups Focus On?
Let’s say you just started a business. You’ve created a fantastic product that, in your opinion, fills a gap in the market. The next step is to figure out how to persuade buyers to value what you’re offering enough to create demand.
Most people believe that the real struggle is to get clients on board. While that is true and every businessman faces the difficulty of recruiting new consumers, keeping existing customers is just as crucial for a company’s development and survival.
Getting a new client can be five times more expensive than retaining an old one. So instead of only running after new customers, also work on your existing ones. Clients leaving will always be considered more harmful than the failure to recruit one. Never think of client churn as something inevitable – regardless of what anybody says to you. There are several ways to reduce client churn.
All you need are appropriate and result-oriented techniques that help you lure and retain customers! But before we dive into these techniques, let’s first shed light on the importance of customer retention and engagement, not just for startups but businesses in general.
Importance of Customer Retention and Engagement
Customer retention can be considered as a marketing strategy that is used to build a strong connection with the existing customer base. If done right, this can lead to countless benefits. Your customers will become repeat purchasers, ultimately bringing in more revenue for your business.
If your business plan lacks a strategy for retaining and engaging customers, you’re on the road to failure. It’s important that you identify the loopholes that are holding you back from applying proper customer retention strategies. If you fail to do so, you will ultimately go out of business.
The best way to prove the importance of customer retention and engagement is by showing you its benefits. So, here they are.
Benefits of Customer Retention and Engagement
Mentioned below are the benefits of customer retention and engagement. These benefits will make sure you don’t overlook the fact that your current customer base matters a lot more than acquiring new ones!
- Higher revenues. According to a study, engaged customers are likely to bring 1.7 times more revenue for your business as compared to other customers.
- More people get to hear about your business. When you are successful at retaining and engaging your customers, it’s likely that your current customers will tell you about your products and services to their friends and family. This way, word will travel fast, and this can bring in more business for you.
- A competitive advantage. If your top priority is to make your customers happy, you are doing it right. Catering to your customers’ needs and wants will make your business stand out and make it more resilient to the competition.
- Retention is cheaper than acquisition. Before we get into the explanation of this, let’s first discuss the difference between retention and acquisition. In simple words, retention means keeping your current customers happy, so they become loyal to the brand and become repeat purchasers. Acquisition, on the other hand, means attracting new customers to buy your products or services. With the difference between the two explained, it’s essential to note that it is more costly to bring in new customers than to keep the existing ones. Hence, you should do your due diligence before deciding which strategy suits you better.
Tips for Startups for Retaining and Attracting Customers
1. Track Customer Usage
Customer usage tells you the success of your product and the satisfaction derived from it. To prevent consumer churn, it is essential to keep track of your clients and their use. As soon as you see consumer metrics declining, try to find out the reason behind it.
The possible reasons for a decline in customer usage can be:
- Lack of understanding of the product
- Lack of information on how to use the product
- A drop in product quality
- A decrease in consumer interest
- Negative perception about the product.
In such situations, do not hesitate to reach out to the consumers yourself. This is because about 96% of dissatisfied consumers leave without complaining. Contact them to find out what their complaints are and aim to resolve them immediately. Your cancellation process can contain a survey that asks them to specify a reason for their action!
Create a particular implementation plan with your client relations team to prevent possible loss due to poor participation. Set up automatic processes that prompt your team to take the required measures to reengage disengaged customers.If you are a SaaS company, SaaS email marketing automation can prove to be vital for you to track your customer usage and send automated emails accordingly.
2. Prioritize Customer Success
The key to a successful retention strategy is to deliver the finest possible customer experience. When you assist a client and guide them to successfully use the product, the client’s lifetime value rises naturally.
When a consumer expresses dissatisfaction or provides feedback, it indicates that they still desire to utilize your service. They simply have a complaint or a recommendation on how to improve your product. Did you know that customers with resolved complaints are more likely to become loyal clients than an average user?
Therefore, when people provide input, you must pay attention and act on it.
If you are wondering how to ensure customer success, look at the possible way to achieve it:
- Get feedback from customers through surveys, panels, or one-on-one meetings
- Establish an information bank that the customer can access to solve frequently occurring problems
- Training your staff to conduct consultations.
3. Generate Expansion Revenue through “Sticky” Product
A “sticky” product loosely translates to a product that your consumer sticks around for. In short, it is something that they both love and need and therefore cannot live without it. It is easy to generate revenue through such products because it has a loyal consumer base.
It may tempt you, but glue is not the answer here. To make your product indispensable – or as they say, “sticky” use these techniques:
- Deliver value to the consumers as quickly as possible.
- Solve an issue the consumer faces daily.
- Integrate emails, texts, and notifications that act as constant reminders. They have the potential to increase consumer engagement 4 fold.
- Have default settings to accelerate the realization of the product’s value. Customers can have the option to personalize later.
- Include tutorials and training sessions that equip consumers with essential information.
- Do not include unnecessary features that can make the product complex to use.
- Give incentives to encourage the consumer to invest time into the product.
If you have a sticky product, not only do you keep your consumers from churning but also ensure maximum customer satisfaction.
4. Dunning Emails and Reducing Involuntary Churn
Most companies continue to work on their product, trying to cater to issues due to which consumers voluntarily leave. Equally important is the often neglected segment of the consumers that churns involuntarily. This occurs when consumers fail to pay due to lack of funds, a lost card, or simply because they forgot!
Reducing involuntary churn is essential because customers would have continued their relationship with you and have no deep-rooted issue with the product itself. The easiest way is by dunning emails.
You should send emails to the customers before the payment deadline reminding them about it. About 35% of consumers fail to pay just because they forgot it! You can use email marketing automation tools for startups that:
- Alert the consumers a week before
- Give the consumers a 24-hour heads-up
- Inform them about a declined card
- Provide them with a week post their deadline with an additional penalty as the last chance.
Apart from dunning emails, a well-thought-through email marketing campaign can also help reduce churn rates and keep customers engaged. Make sure you do your research beforehand and use some great SaaS email templates.
5. Offer Annual Contracts to Reduce Churn Rate
Monthly payments may attract clients, but annual subscriptions guarantee more business upfront, enhance cash flow, and, most importantly, prevent turnover. Because yearly contract clients may only cancel once a year rather than monthly or quarterly, they have limited chances of churn.
You may be creating a barrier to entry with annual contracts, but you can’t deny that if clients abandon your service, you won’t be able to exist, much let alone expand and develop.
Simply put, an annual plan ensures that a client will be with you for at least a year. That’s a significant increase in client lifetime value, and you’ll have more time to connect with the client and guarantee the product’s effective installation. Because of their financial investment, the clients, too, will strive to make the most of your offering and incorporate it into their everyday activities.
Startups frequently concentrate on new client acquisition figures while overlooking their churn rate. It is imperative that every business analyzes its reasons and has a plan to reduce client turnover as soon as feasible. Use the technique or a combination of techniques that work best for your product and company to achieve the most fruitful results.