9 Research-Backed Customer Retention Strategies

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Managing customer retention is an incredibly important part of
growing a sustainable business. According to research
from Harvard Business School
, increasing customer retention
rates by only 5% increases a company’s profits by 25-95%.

Poor customer retention is similar to filling a bucket with
holes in the bottom: sure, you could keep piling on to make up for
it, but you’re much better off figuring out what caused the holes
and how you can patch them up.

Retaining customers costs less than acquiring them, and both add
to your company’s bottom line. So before you go all-in on tactics
designed to get new prospects into your sales pipeline, consider
using one of these nine research-backed customer retention
strategies to grow your revenue by keeping the customers you
already have.

  1. Stand for
    something
  2. Capture your
    product’s momentum
  3. Don’t just sell
    — educate
  4. Deliver
    surprise reciprocity
  5. Find ways to
    delight your customers consistently
  6. But focus on
    service before delight
  7. Accept that speed
    is secondary to quality
  8. Build your
    customer loyalty programs the right way
  9. Reward your loyal
    advocates

1. Stand for something

Very few customers feel they have relationships with the brands
they purchase from and use. In fact, a study by
the Corporate Executive Board
that included 7,000 consumers
from across the U.S. found that only 23% of consumers have a
relationship with a brand.

Interestingly, 64% of the consumers who said they have a
relationship with a brand cited shared values as the
primary reason for that relationship.

Most people prefer products and companies that resemble them in
some way. This cognitive bias is called
implicit egotism
and is an important thing to keep in mind.

Customers are more likely to ignore you if your company
doesn’t stand for anything. If you want loyal customers, you need
to create real connections with them by letting them know what
values you share.

For example, in 2019, we completed the
process of becoming a certified B Corp
. The certification both
keeps us aligned to our values as a company and shows our customers
that our purpose is not only profit but also a positive impact for
employees, communities, and the environment.

As Nick Francis writes:

“There’s no such thing as being ‘above politics’ or not
taking sides as a brand. It would be great if companies didn’t
have political agendas, but they inevitably do. And if companies
are inevitably political, then we want to be deliberate about the
things we stand for.”

What does your company stand for? If you define your values and
highlight them as part of your brand, it will be easier to retain
the customers who share those values.

2. Capture your product’s momentum

When exciting improvements are being made to your product,
everyone in the company feels the momentum. But do your customers
feel the same way?

They won’t unless you take the time to
share your work
.

Create excitement with current customers by showing them what
your latest features will help them accomplish.

For example, as we prepared to introduce major improvements to
our Beacon product in 2018 (such as the addition of live
chat
), we ran a series of preview posts (like this
and this) to
generate excitement about everything customers would be able to
accomplish with the new tools.

Not only does this build momentum for upcoming releases, but it
also helps promote new features that existing customers might
otherwise miss. And according to
research from CX Solutions
(formerly TARP Worldwide), telling
customers about new products or services they can really use
creates an average 30% lift to repurchase or recommend.

3. Don’t just sell — educate

The same CX Solutions study mentioned above also found that
“proactively providing information on how to avoid problems or
get more out of your product” creates a 32% average lift to
repurchase or recommend.

The last thing you want to do is leave customers to fend for
themselves after they’ve signed up. It’s crucial to offer
resources that make it easy for new customers to learn how to use
your product.

There are a lot of different ways to train new customers on how
to use your product:

At Help Scout, we offer recurring 45-minute live
classes
that new customers can register for in order to learn
more about our product and ask any questions they have.

4. Deliver surprise reciprocity


Reciprocity is the social construct
that makes the world go
‘round and keeps customers coming back.

The concept of reciprocity is simple: people respond based on
how they’re treated. When someone is treated nicely, they respond
nicely. When they’re treated poorly, they respond poorly.

It’s no wonder then that consistently good service is one of
the biggest drivers of repurchases and recommendations.

impact on repurchase or recommendationsSource:
CX Solutions

And while reciprocity works incredibly well on its own, research
shows
it’s far more powerful when it’s a surprise. Recall a
time that someone did something nice for you unexpectedly. The
gesture probably wasn’t all that unusual, but the fact that it
came out of nowhere likely left a strong impression on you.

Brainstorm some ways you can surprise your customers with a kind
gesture. For example, at Help Scout, we occasionally send
handwritten notes
and swag to our customers just to say thank
you.

Thank-you notes are a rare throwback to old-fashioned, personal
customer service; they stand out as a delightful gesture that makes
customers feel special and cared for. The relationship-building is
well worth the relatively minimal investment.

Free PDF: 25 Ways to Thank Your Customers
Free PDF: 25 Ways to Thank Your Customers

For more ideas, check out this handy guide to
building a loyal customer base.

5. Find ways to delight your customers consistently

Discounts and freebies are a great way to delight your
customers, but they can be costly. Instead of leaning too heavily
on these delighters, you should embrace the art of the frugal wow —
creating reciprocity through small, thoughtful gestures.

In fact,
psychologist Norbert Schwarz found
that as little as 10 cents
can create reciprocity between two individuals. It really is the
thought that counts.

One small way we try to consistently brighten our customers’
days is by building what we call “huzzah” images into our
product — a fun illustration and caption that appears when
customers reach inbox
zero
.

@helpscout I like the
encouraging vibes when getting through the tickets! pic.twitter.com/gpEOgdTPCv

— Rosemary Lynch (@rosemary) November
30, 2016

.@helpscout You get me <3
pic.twitter.com/eemgbm2GQ0

— Tamikya Van Der Wel (@Takiah) November 24,
2016

It may seem like a small thing, but if you can make people feel
good about using your product, they’ll be more likely to stick
around.

Another example: in a
study from the Journal of Applied Social Psychology
,
researchers found that waiters and waitresses could increase their
tips by 23 percent through the simple act of returning to tables
with a second set of mints.

6. But focus on service before delight

Many companies assume exceptional customer service can only be
achieved by going
above-and-beyond
— that loyalty is built on showy
gestures.

But according
to research
from Dixon, Toman, and DeLisi published in The
Effortless Experience, the true driver of customer retention and
loyalty is the ease of getting a problem solved.

Delight isn’t the foundation of a customer service strategy;
it’s a second-order effect. First, focus on consistently meeting
expectations and avoiding unpleasant surprises. Then go the extra
mile. Here are a few more tips.

Provide support on the right channel(s)

It’s important to make sure you’re providing support on the
channels that make the most sense for your business and your
customers. Hosting companies, for example, know that live chat is critical
when their customers’ sites go down; other companies may have
customers who prefer using self-service, or
even phone support.

Free PDF: Choosing the Right Support Channels for Your Business
Free PDF: Choosing the Right Support Channels for Your
Business

It’s better to excel at a few channels than to spread your
team thin and provide poor service. Download this simple, free
guide to choosing the best customer support channels for you and
your customers.

Make customer support a communal effort

Countless case studies have made one thing clear when it comes
to creating an efficient support system: you need to keep everybody
in the loop.

At Help Scout, we use our
integration with Slack
to access real-time notifications of
what’s happening on the customer end. We were able to improve our
response time by 340% (not a typo!) by creating a support channel
for all of our teammates.

7. Accept that speed is secondary to quality

When it comes to highly rated customer service, quality and
completeness matter more than
speed
.

According to
research from Gallup
, customers were nine times more
likely to be engaged
with a brand when they evaluated the
service as “courteous, willing, and helpful.” “Speedy”
service, on the other hand, only made customers six times more
likely to be satisfied.

Telling your team to spend more time with customers might seem
counterintuitive, but numerous behavioral psychology studies have
shown that everyone views their service experience as more positive
when they don’t feel rushed or ignored.

Whether you’re responding to support requests or delivering
new features, speed is only delightful if you’re delivering
exactly what your customers need. You’ll do more damage than good
by rushing and delivering something that creates more problems than
it solves.

In fact, research
conducted by John Goodman
found that customers were much more
sensitive to price changes — and thus more likely to churn —
when they experienced a few problems with the product or the
support they received.

Problems increase sensitivity to priceSource: Strategic Customer
Service
8. Build your customer loyalty programs the right way

The key to creating loyalty programs that work is to know why
customers use them and what gets customers to keep using them.
Luckily, there’s a ton of research on customer loyalty programs
that you can use to set your program up correctly from the
start.

Give loyal customers a head start

Consumer researchers Joseph Nunes and Xavier Dreze are known for
their studies on the Endowed
Progress Effect
. Their results have conclusively shown that the
biggest pitfall in preventing customer
loyalty programs
from succeeding is getting people started.

In their well-known car wash study, participants were twice as
likely to finish loyalty cards when they were automatically started
(or rewarded) as soon as they signed up.

Make ideal customers VIPs

Additional research by Dr. Nunes on retention programs has shown
that people love being VIP or “gold” members. There is one
caveat, though — this only works when people know there is a
class below them on the totem pole. Speaking to human nature, Nunes
saw a notable increase in gold members’ participation as soon as
he implemented a silver class.

Assign your customers positive labels

Research on voting patterns conducted by
Stanford University
revealed people are more likely to
participate in something if they are labeled with a positive
trait.

Buffer refers to their premium customers as “awesome”
members and even named their upgraded payment plan the “Awesome
Plan.”

9. Reward your loyal advocates

When your customers go out of their way to recommend your
product or service to others, let them know that you see and
appreciate it! If you spot someone recommending your business on
social media, for example, reply to say thanks. It shows you’re
paying attention and that their testimony means something to
you.

Another way to recognize your brand advocates is with a referral
program. For example, we give
our customers a $100 Amazon gift card
when they refer someone
who becomes a customer (and that new customer gets a $50 credit on
their account).

Help Scout referral program

Retaining customers is a balancing act

There are many customer retention strategies, but there are no
shortcuts. You can’t hack a personal relationship, so why should
we assume business relationships are any different?

The bottom line is that the strategies above should hopefully
give you some fresh ideas for approaching retention, but they’re
not a cure-all. Your product and service will do most of the heavy
lifting in keeping customers loyal, and there are no shortcuts for
that.



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