how to Build a retention strategy that works

Justine Jacquot

JUSTINE JACQUOT

Approx. reading : about 6 min

If retention and fighting CHURN has not been part of your strategy until now, it is time to change this now. The economy is in crisis, so putting everything on winning new customers is risky.

Rising inflation, less capital, lower business valuation, difficulty in getting supplies, all these factors point towards the need to refocus your attention on the customer and on operational efficiency.

This is the best way to prevent the crisis from affecting your company!

Besides, refocusing on retention and on fighting CHURN comes down to recognizing that your customers are being affected by the crisis too. And that you have to help them to remain efficient. In our article dedicated to the 12 simple and efficient tips to fight CHURN, we highlight the importance of having a strategic approach to retention.

Also as we mention in the article, your customers need you and your solutions. They do not expect only temporary price reductions or price adjustments. They want to be able to face their obstacles better thanks to the solutions that you provide them. 

And that is a huge opportunity for your company!

CUSTOMER RETENTION AND FIGHTING CHURN: A MATTER OF PROFITABILITY

I’m sure that you have already read that retaining a customer costs a lot less than winning a new one (let’s not even talk about the cost of winning back a lost customer). The numbers vary from X5 to X25 for winning over new customers when compared to retaining them.

That becomes even clearer at a time when the pressure on wages is increasing due to inflation. This has a direct impact on acquisition costs (CAC) and on EBITDA. So winning over new customers will be more expensive.

And retaining customers and fighting CHURN will too! In fact, customers who are going through difficulties could ask you to lower your prices or to pause recurring invoices temporarily. You will have to devote money, wages and time to support your customers so that they can get the most out of your solutions and more added value from your products. 

In summary, a retention and anti CHURN strategy is a tactical need but also a question of preserving the profitability of your company. 

Since retaining customers and reducing CHURN will cost you money anyway, it is better to turn it into a tool that generates growth and revenues! Don’t you think so? 

TURN RETENTION AND THE FIGHT AGAINST CHURN INTO A TOOL TO GET ADDITIONAL REVENUES AND TO GROW

Many companies view retention as an additional expense, a support function to avoid the leakage of revenue. This is also one of the reasons why customer retention and fighting CHURN is often entrusted to the Customer Success Manager, and it is approached as a general satisfaction and usage support without a commercial strategy.

In addition to this, KPIs (key performance indicators) and metrics to monitor retention and CHURN are often expressed and monitored as a percentage only. Although, what is really important is to know the ARR and MRR (in EUR or in USD) that have been lost and also how many Euros/Dollars have been spent in the past by the company’s staff to try to retain the customer, sometimes in vain. 

Not using retention and the fight against CHURN as a strategy to grow is accepting the loss of revenues and simply considering the strategy as a way to push it to as late as possible. 

It is a little strange, and even stupid, don’t you think so? 

So, how can you turn retention and fighting CHURN into a tool to grow?

Here are the 3 points to get you started.

1. Customer retention generates revenues: acknowledge that your business can make revenue from retention

Measure retention from an “revenue earned” perspective and not only from an “revenue retained” (or “not lost” if really pessimist) perspective!

It is of course essential to follow the metrics of CHURN rate, retention rate to know whether or not you are retaining your customers. However, we advise you to consider upselling, upgrading and cross selling as revenue generated by retention. You should  create a “retention revenue” rubric made up of upsell, upgrade or cross sell revenues. You can then monitor these retention revenues, coming from additional sales, as a percentage of total sales and revenue. Also add the revenues coming from retention to your LTV (Lifetime value) follow up; again as a percentage and currency. 

By considering additional sales as retention revenue, you can change the perception of your teams and give a more strategic place to retention and to the fight against CHURN.

You probably agree that this is a little more than just support, don’t you? 😊

2. Segment your customers to adapt your retention strategy and your strategy to fight CHURN

Measure the way your solution is perceived by your customers and received by your customers.

No customer is alike, you know that. It is important to know which customers are a priority and which are the ones you should not let go. And it is not always a question of money, it could also be a question of the reputation of your customer. 

You need to segment your customers. Firstly, according to the LTV. Secondly, based on the usage rate of your products by the customer in order to identify those who get a greater profit from using your product. Finally, you should identify those who are likely to subscribe to additional services because of their needs in relation to your solutions. 

Besides, those customers who get more value out of your products will be less demanding to remain your customers when compared to those who perceive your solutions as less valuable. The latter might even consider a 30% discount for 6 months as a bad offer. 

You need to understand that retaining 100 customers who consider your solution as having a low value with a 30% discount is not necessarily better than retaining 50 customers who perceive your solutions as highly valuable with a 5% discount (to whom you could offer additional services/sales eventually).

In conclusion, the cost of retention depends on your customer segments and you need to understand that very well. 

3. Give yourself the means to generate retention revenue: additional sales

Stop using flat or non modular rates so that you can get additional revenue from retention.

The moment when they have the opportunity to create additional revenue from growth, a lot of companies see the fact of offering flat rates as limiting because they were unable to create flexible or above all modular rates. It is the same thing for companies that have restricted their price evolution to the creation of multiple progressive plans with increasingly complex and rich functionalities to justify upgrading and or a higher price. 

During challenging times, your customers might not want to upgrade or pay more to have more. They will want that each euro spent gives them back immediate value. 

How can you generate growth and additional revenues from retention without the option or the possibility to do an “specific upgrade” i.e. only of a part of your solution and not of the whole or a superior pack. 

By forcing your team to convince your customers to upgrade to a superior plan/ level/pack in general, you will be forcing them to make significant discounts. Thus, you will slow down your growth and you will be limiting the benefits of retention just to increase your company’s net results temporarily. 

DOTSHA YOUR SOLUTIONS PLATFORM ALLOWS YOU TO DEVELOP YOUR RETENTION AND CHURN REDUCTION STRATEGY IN JUST A FEW DAYS

Dotsha has perfectly understood the tactical and financial challenges of retention and of fighting CHURN. Our mission is to offer you the tools that will make a difference for you by simplifying modularity, automating invoicing, allowing upselling and cross-selling without the need of complex developments.

Dotsha helps you reach your full retention revenue potential in just a few days. Our platform will allow you to :

dotsha susbcription management and usage-based billing platform can help you deploy the agility you need to maintain your competitive advantage for years to come.

About DOTSHA

dotsha delivers the first subscription-to-cash automation platform designed to put every subscription-based or usage-based business on autopilot … from early subscription to cash collection!  

Your business can scale fast without turning its back-office into a mess! 

Keep growing faster… we’ve got your back !

All-In-One platform that unify {Pricing}+{Check-in}+{Billing}+{Payments}+{Dunning}+{Reporting} while the MRR just keeps growing, dotsha’s plaform is an easy to use and quickly implemented cloud-based platform that augment your existing information system with robust API integrations in order to deliver optimal automation with minimal code. You will forget we are there!

Justine Jacquot

JUSTINE JACQUOT

Approx. reading : about 6 min

Keep your brain constantly refresh by new perspectives that relates to the future of your business.
Our content will help you to explore new areas of good practices.
Join our community of readers, it’s free!

What will you receive in your inbox?