The debates over customer retention and acquisition marketing have always been contentious for the business fraternity.
Focusing on retention marketing paves the way to business growth by reducing expenses on expanding marketing and sales outreach and by providing your customers with the value, in a propitious manner inviting brand advocacy and positive word-of-mouth-marketing (WOMM).
Acquisition marketing requires a lot of investment in terms of marketing to potential customers, hoping that they would buy, and while that is important, equally important is not to take retention marketing for granted.
In fact, focusing on retention marketing paves the way to business growth, as gaining momentum from high-quality customer feedback, helps you acquire more customers and lowers the overall investment made in the marketing endeavors.
Thus, focusing on retention marketing paves the way to business growth and fuels revenue more easily, as well as, effectively.
Thus, evidently, retention marketing paves the way for revenue growth.
Now, the important question pops up.
How do you increase client retention?
According to research by Loyalty360, 95% of the customers expect businesses to communicate proactively, not reactively.
Another report by Loyalty360 also advocates that customers greatly feel that humanized interactions including phone calls (62%), emails (46%), chats (37%), self-services (14%), and bots (13%) help them in tackling their pain points and thus, optimize their experiences.
Does that mean retention marketing is solely the responsibility of customer success teams?
Well, absolutely not – it is a shared responsibility of all the departments within an organization.
According to research by American Express, 33% of Americans are likely to switch companies after just a single bad experience.
Retention marketing should be the cumulative endeavor of all the departments within an organization. Attributing customer retention solely to the customer success teams can prove to be detrimental to the revenue growth of your organization, and will hurt your ROI from blossoming to the fullest.
Let’s see ways in which retention marketing paves the way to business growth:
1. Retention Marketing Leverages on the Value System
Be it showing your customers empathy during the current pandemic crisis by accurately addressing their pain-points, or showing them the value proposition of your products or services to convey them that you care about them and hence have devised a solution, or simply letting your customers know that you understand them well enough to optimize personalized experiences for them across omnichannel, are all effective strategies to hack your way to growth.
Retention marketing paves the way to business growth as it helps you convince your customers to stay with you and re-invest in your products, services, and after-sales services by showing them the value proposition of your products or services.
When you provide your customers with proof of value, it evokes emotions that deviate them towards taking buying decisions. This strategy serves the brands better than adopting conventional paid advertising strategies such as Google Ads for web-based micro-optimizations.
2. Customer Success Should Be the Ultimate Aim of all Departments
Having a customer success team is absolutely essential to address the customers’ grievances on time and taking proper steps to resolve them. Often, customers struggle when what they have been told and sold doesn’t match.
It’s the responsibility of sales teams to keep the conversation transparent, while still engaging the customers by reflecting on the value proposition of the products or services.
The increase in customer retention is directly proportional to the reduction in the churn rate and marketers need to understand that customer-centricity is the key to delighting the customers and retaining them after the sales process. You need to develop functional relationships with the clients, prioritize their needs, and proactively address their grievances to retain them.
Customer success is the cumulative responsibility of all the departments, not just customer service or sales teams. Remember that as the customers move along the conventional sales cycle and even after-sales deals have been closed, all the departments must collaborate to provide the customers with seamless experiences and bolster the retention marketing endeavors.
3. Focus on optimizing the Net Revenue Retention (NRR)
Net Revenue Retention (NRR) represents the difference between expansion revenue and churn. Of course, your Annual Recurring Revenue (ARR) is important; however, amidst the present uncertain times focusing on the Net Revenue Retention (NRR) and its optimization becomes very important.
If your NRR is well over 100%, it signifies that you are adding more install base than you’re losing. NRR may also mask customer attrition. The currency invested that doesn’t renew is attrition.
As spikes in the expansion revenue from some customers make it less obvious that others are churning, the NRR can also mask customer attrition. For marketers, it becomes important to understand that they need to take measures to optimize both the sides of the install base equation i.e. the profit made through expansion and loss incurred through attrition.
A focus on optimizing NRR sends a positive message to your stakeholders. An optimal NRR bears a direct correlation with a healthy and vibrant customer base that trusts your products and is happy with the experiences that are being delivered. This means that positive sentiment is being evoked by your brand which not only fetches more customers but also retains them.
4. Showcase the Value Proposition of Your Products or Services
Retention marketing paves the way for business growth, and to improve client retention showcasing the value proposition of your products or services is a good strategy. If your product or service delivers the value that your brand promises, your entire revenue cycle will be positively impacted.
An organization where sales teams deliver what they promise, and are backed up by the customer success teams in terms of analysis, reporting, and optimization of customer experience indexes will witness greater customer satisfaction and retention.
Organizations, where sales and marketing teams are aligned, can orchestrate the customer lifecycle with a desired set of outcomes. This not only simplifies selling but also helps marketers to clearly establish what works the best for them to optimize customers’ experiences post-sales and retain the customers.
Read more on 5 Essentials of B2B Sales and Marketing Alignment
A strategic approach to customer value optimization by showcasing the value proposition of products or services fuels the retention goals for an organization.
5. Make Customer Value a Tangible Goal
Creating a customer value that is tangible and measurable feeds a new funnel that may be called the new customer funnel. This funnel, much like the prospect funnel is designed around nursing the confidence of prospects to inspire their conviction.
Contrary to the prospect funnel, where confidence and conviction come along with second-hand proof in the form of the likes, testimonials, ratings, and reviews, in the customer funnel confidence and conviction come from first-hand proof, that the customers can see.
Making customers see the measurable values that are delivered through the products or services inspires them for repeat purchases and customer advocacy.
Google uses this business model. They allow marketers to view how their ad investments convert into revenue. Thus, marketers feel happy and inspired to invest again.
Wrapping Things Up
According to research by Fred Reichheld, globally acclaimed author, speaker on loyalty and Creator of the Net Promoter System (NPS), and a fellow at the Brain & Company, a 5% boost in customer retention rate, increases the profits of an organization by a margin of 25% to 95%.
Moreover, according to Harvard Business Review acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one.
Clearly, retention marketing paves the way to business growth by allowing you to make the optimum utilization of your time and resources.
The businesses should test-run and figure out the right time span to measure their average customer retention rates. Depending upon the type of your business processes, objectives, and observations, the right time to measure the customer retention rate can vary anywhere between a couple of days to several months.
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