- On this blog post, you'll learn:
- That ROI has everything to do with CS;
- Possible cause for your retention problems;
- How to avoid them.
If you ever stopped to wonder about ROI, it's very likely that you've related the subject to the marketing area. But I have a little secret to tell you: return on investment has also a lot to do with customer success. The problem is that the most companies spend a lot of time and effort talking and thinking about the ROI of their customer acquisition efforts and don't even think about the return of the customer retention strategies.
Well, surprise, surprise, business growth is based on a combination of customer acquisition and customer retention techniques depending on the stage of your business. So you do need to measure the return of your retention plans to guarantee that you are on the right path (and improving overall ROI). I mean, if you are measuring how much you are investing in acquiring new customers, what about your investment in keeping the existing ones?
As we know, keeping customers is cheaper than acquiring them so this already gives retention an advantage. Besides, if you're building strategies to retain the client it means you already acquired him/her, so you don't need to take into account the customer acquisition cost. And to make things even better, once the client went through the user onboarding (which has to be well-designed to guarantee that he/she will stay with you) all you have to do is provide a great customer experience and service to finish in the first place.
The ROI of customer success
When it comes to calculating the ROI of the customer success strategies, you can always take into account the renewal and upselling rates. After all, these two actions are directly related to great customer experience and service. In other words, the customer is happy with the product and support provided.But there are also some more basic metrics that you need to look out for if you want to improve ROI.
First of all, don't forget to analyze the most obvious metric: the customer retention rate. The math is pretty simple. Just take the number of customers at the end of a period minus the number of new customers acquired during the period, divide it by the number of customers you had at the start of the period, and then multiply the results by 100.
For example, let's say that you started the month with 1000 customers. By the end of the month, 150 people have left, but you've acquired 200 new customers. Knowing that you need to subtract the number of new customers you now have a total of 850 retained customers. This means that your customer retention rate is 85%.
The customer lifecycle value (the prediction of the total value generated by a customer in the future across the entire customer lifecycle) is another number to watch. The metric gives a projection of the revenue that you will have from one customer for as long as he stays within the company. By knowing that, you can determine how you can spend on customer acquisition and it helps you calculate ROI.After carefully analyzing all this data you will be able to identify possible problems that might be interfering with your churn rate and then create a customer retention program to increase ROI.
5 customer retention pitfalls that your company might be facing
Are you sure you are on the right path to gain your customer's heart? Do you have a customer retention plan in action? Is this plan aligned with the results you're having from your clients?
Remember that there are a few signs that show that your customer is not taking full advantage of your product and might be at risk of leaving you in the future. I've listed 5 problems that might be hurting your company's revenue and affecting your return on investment.
1)Customers who stopped using the product soon after onboarding
Unfortunately this is a very common obstacle. There are some customers that gradually stop using the product right after going through the onboarding. Usually, this means two things: your onboarding wasn't powerful enough and you didn't manage to delight the customer, or the customer simply didn't perceive the value of the product.
Why is that? Well, you either didn't know what the customer desired outcome is or you forgot that bringing a solution for your customer's pains are the most important thing.
Proper onboarding isn't done to prevent churn; it's done to ensure the customer achieves their Desired Outcome. Retention comes from that
But the question is: how to bring the customer back after realizing that he/she is no longer using your product?
First, you need to address clients with distinct approaches for different situations. For example, a customer that has started to slip away soon after onboarding can't be treated just like the one that suddenly stopped to use the product after one year of usage. Treat them differently. Be personal. Show that you know the customer and would like to understand the problems they are facing.
Customers don’t forget to use your product, they lose interest in it. So keep them interested. Introduce new features. Give a fuller explanation on the existing ones. Show different solutions for the same issue. Try to be visual. Use the help of videos or images to show your point. And always put yourself in the client's skin.
Bear in mind that if you manage to successfully bring the customer back, the real job has just started. You need to keep working on retention strategies to ensure that you keep your customers, and improve your ROI rates by default.
2)Lack of an upsell strategy
Failing to create an upsell strategy can have a negative impact on your company's ROI. Upselling is one of the most effective ways to grow your business. It consists of expanding your services to new and current customers, and therefore increase revenue. Obviously is much easier to upsell for your existing clients, mainly because they already know and trust you (let's hope). Besides, the cost of acquisition is much lower compared to prospects and the chances of having a higher response rate are bigger because you already have a relationship with clients, of course. Not to mention that the sales cycle is much shorter.
3)Poor customer success management skills
It's important to understand the real function of the customer success in a SaaS company. In a few words, we can say that the customer success is there to ensure that the customer achieves the desired outcome of a company's product. The consequences of that are retention, loyalty, and advocacy.
Note that the main goal is not avoiding churn. This is not what will motivate your team. Your motivation should come from working towards the customer success within your product or service. The low churn rate is merely a result of that.
No Customer Success = No Your Success
4)Weak data analysis
To be able to do all the things that I've mentioned above you need to collect and analyze the right data from your customers. Who are they? What have they been doing in your product? How active are they? What features do they use? And so on. But how will you that? To start, you need a good marketing automation platform that allows you to acquire, store and analyze all the information from your customers.
With a business intelligence tool, you can create an uncountable number of reports to analyze whatever metrics seems relevant to your company. We'll talk about that next week here on the blog.
The main point is that you will be capable of measuring your effort's results and adjusting whatever you need in real time. This gives you better control of your strategies and helps you improve ROI.
If your customer is not using your product at its fullest, chances are he/she is not perceiving the real value of it. To make things worst he/she might be facing problems with it and you might not be giving the appropriate response. The result of bad customer experience and service? Unsatisfied customers.
How to turn this around? First of all, listen to them. And let them know that you're listening. Then, do everything you can to delight them by providing the correct solution to their problems. Converting unhappy customers into happy ones can be a great asset to your company. Even better, you can turn an experience with an unhappy customer into an opportunity to drive profitable change and growth for your business. Just learn from your mistakes and never stop looking for improvement.
Remember that customer retention is about delivering good, personalized experiences so that your customer stays with you for as long as possible. This will enhance your revenue, increase ROI and do wonders for your brand reputation.
Churn rate is a rather scaring metric and one of the most difficult to tackle, but with a little bit of attention to detail and a customer-centric approach, you can knock your churn down.