A 5% increase in Customer Retention can increase your profitability by 75%
Coronavirus is causing businesses to shutdown nationwide. Besides a lucky few, those that remain are still on edge. With more of the world working from home, reliable technology is needed more than ever. So here’s what you should know about retaining and reassuring your customers and how you can help them in this time of great need.
1. Firstly, consider some numbers
Begin by determining which type of retention rate is smarter to optimise for. Gross retention rate (GRR) or net retention rate (NRR). GRR is the percentage of customers that stay with you over a given period – a year in many cases. Because you can only renew customers you already have, the maximum GRR possible is 100%. It’s calculated by dividing the revenue renewed during a given period by the total amount able to be renewed. Renew £800,000 over a year out of a possible £1,000,000 and your GRR is 80%. However, in that year, you may have upsold or cross- sold to your customers. Add these takings to your GRR and you get your NRR. This means an NRR can be more than 100%. So if you renew that £800,000 and upsell say £300,000 then your NRR is 110%.
(800,000 + 300,000)/1,000,000 = 1.1 (or 110%)
But which one is best to optimise for? Net will tell you more about how well the business is currently doing, but gross will say more about the long term health of the business; This may help you think further on which is more appropriate. Next, consider the LTV; the lifetime value of a customer; how much a typical customer is worth to you. There are many ways to work this out but for subscription models, the following method works well. Take the average monthly amount expected from a customer and multiply that by the average length of time they will be retained for as your customer. So if your customers spend on average £1000 every month for an average retention period of two years (24 months) then their LTV is £2400. This will help you determine how much to spend on retention. Depending on what you’re reading, acquiring a new customer is anywhere from five to twenty-five times more expensive than retaining a new one. And with MSP customer retention rate at 90% or more, that’s a high LTV for a typical MSP customer. This makes expenditure on retention a wise move. So here are some methods for doing so.
2. Keep them up to date with newsletters
Our phones are a constant source of bad news right now. This positions your MSP to be a stable and reassuring voice of calm. Let them know you’re still there for them. Let them know about updates and offerings that might ease their pain. Helpful articles perhaps or, simply informing them of business as usual. It all helps.
3. Provide regular Social Posts
Social media can provide similar reassurance and guidance.The conversational batman of social media can allow your business to inform and address concerns more personally.Worries from your customer scan be quickly addressed with a well-chosen post. Equally the two-way street that social offers means feedback can be obtained more easily plus any worries –and we’re short of those right now - can be heard rapidly. Speaking of feedback...
4. Ask for feedback regularly
Ideally from a variety of customer team members. Firstly, it will show that you care. When you act on it, it’ll show that you listen. And if customers do choose to leave, it will help to show you why they left. This will help you be proactive in retaining customers in the future.
5. Respond ASAP
There’s enough panic in the air as it is without leaving your customers hanging during a time of need. So respond quickly to incoming communication, preferably within around 20 minutes during business hours. For ultimate kudos, be proactive and address issues before a customer contacts you.
6. Subtly remind your customers of your wins
Again, all the more important in the current climate. Keeping successes front of mind will help anyone soldier on. Shoehorning success stories you’ve created for a customer may feel forced or desperate. But if there’s say, a natural opportunity to remind them of some great metrics you’re responsible for, there’s no need to keep quiet about them.
7. Get good at setting expectations
With everything from response times to updates, the more you show how accurately you can say when jobs will be completed by, the less anxious customers will feel.
8. Do something nice out of the blue
Like a marriage, nothing makes someone feel appreciated like a spontaneous gesture. A call to make sure they’re OK. Or ideally a small freebie such as an audit, a free bit of training or even a box of donuts to their office. Plus, in today’s climate, such gestures will be extra well received.
9. Overdeliver
Going over and above the call of duty sits right next to surprise gestures. Are there other ways you can advise your customers? Many IT solutions overlap into fixing all sorts of business problems in areas like operations, budgeting or overall strategy. If you can improve your customers’ lives with even more than straight up IT support, you’ll be impossible to break up with. So much of retention ultimately comes down to service and customer experience. Is your experience as smooth as possible? Are you making your customers feel appreciated? If not, remember, just like a relationship, rival suiters are at the ready. They’re calling and waving at your customer, ready to steal them from you. So if you’re serious about keeping your customers click here.