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How to Build a Customer Retention Program

Blog by Ian Luck
May 31, 2023

For businesses serious about growth, customer retention should be a priority. Why? Simply, because your existing customers are your most valuable customers. They’re the people to whom it’s cheapest to sell. They’re the most likely to buy new products. And, when they’re satisfied, they’re likely to spend up to 140% more.

Yet customer retention doesn’t just happen by itself. Instead, making customers stay requires hard work. And that starts with a customer retention program.

A customer retention program defines the way you’ll engage with your customers about what they want from your business. Then, it’ll help you build their feedback into your method of doing business. And this way, you’ll put the voice of the customer first, making their experience the most important driver of business growth.

Here, we want to talk to you about how to build a customer retention program. We’ll look at the steps you can take to get started, what it will look like in action, and why it’s just so important.

Let’s get started with the basics.

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What is Customer Retention?

Customer retention refers to the rate at which your customers keep doing business with your brand. Cut out those that churn and the customers that remain will be those that you’ve retained.

There’s a simple formula to calculate your basic customer retention rate: [(E-N)/S] x 100

  • S: The number of existing customers at the start of any time period.

  • E: The total number of customers at the end of the time period.

  • N: The number of new customers added.

So, say you’re calculating retention over a year. Start by taking your total number of customers at the end of that year (E). Let’s say it’s 300. Then minus the number of new customers from that year (N). They add up to 60. But you had 320 customers at the beginning of the year (S).

In this case, your customer retention rate would be (300-60)/320 = 0.75. Multiplied by 100 gives you a 75% retention rate.

Knowing this simple metric is really important because it allows you to benchmark your performance over time. When the ultimate goal of your customer retention program is to grow your retention, it’s a crucial metric to keep in mind.

But it’s not the only metric you’ll need. Instead, your customer loyalty system will draw on the reasons why your retention is at this level. For that reason, you’ll need more than to just track the headline numbers of how many people stay and go.

And for that purpose, you’ll need to get acquainted with Net Promoter Score and other tools that dig deep into your customer experience (CX).

What is a Customer Retention Program?

A customer retention program is the set of systems, processes, and actions that you use to boost your retention rate. As we said, to make this work successfully, your focus should be on the why of retention—from the perspective of the customer.

Net Promoter Score (NPS) is one of the most widely used and most effective tools to understand the factors that are driving retention. It’s a simple survey that asks customers how likely they are to recommend your product or brand on a scale of 0 to 10.

In response to the survey, it divides your customers into three different categories: detractors (who are likely to churn), passive customers, and promoters (who are loyal and enthusiastic customers and likely to be retained).

With this data, you become better equipped not only to see your crude retention rate, but also to predict customer churn and intervene to prevent it. Over the long term, that’s exactly how you’ll move the needle on retention—and drive bottom line growth.

In fact, while many customer retention programs focus exclusively on NPS, at CustomerGauge our focus is always your revenue growth. We believe that your loyalty systems are severely limited if they’re not connected to revenue data.

That’s why our Account Experience program helps you see the value of churn risks and the cost of particular drivers that have the biggest impact on your customer experience. With this knowledge, you can see exactly the return you’re getting on your customer experience investments.

Ready to get started? Here’s how to build your customer retention program for yourself.

How to Build a Customer Retention Program

A customer retention program will reduce the cost of customer acquisition, reveal your most valuable customers (and those most at risk of churn), and help you develop a better customer experience overall.

The investment is worth it. But it’s not going to happen all by itself. Here’s what you need to do.

Before You Start with Your Customer Loyalty Program

Before you kick off your customer retention system, there are three things you’ll need to get right:

1. Secure Internal Support

Even with the best intentions in the world, your customer loyalty efforts will go nowhere if you don’t have your organization onside. Before you get started, make the case for why investment in customer experience and retention is necessary.

There are some convincing ways to do this:

  • Demonstrate the cost of doing nothing. The thing about retention is that doing nothing doesn’t come for free. Churn is simply an unnecessary cash leak—and for every customer you’re not retaining, that’s money lost.

Making the case for customer retention schemes starts by understanding how much cash you’re losing. Calculate the cost of doing nothing with our ROI calculator.

  • Emphasize the wider benefits. Customer retention schemes that use NPS boost your overall customer experience performance. And that will have knock-on effects across your whole organization. You can use customer feedback to drive product improvements, ensure employee satisfaction, and make internal processes more efficient.

  • Leverage the benefits of customer retention. Studies repeatedly show that satisfied customers spend more and stay longer—powering bottom-line growth. There aren’t any other things you can do that will have such an impact so quickly.

2. Assess Your Current Customer Experience Performance

With senior leadership onside, it’s time to take stock of your current performance. That means benchmarking retention metrics as they are today:

  • Customer retention rate. This is the headline retention figure we mentioned above. It’s one of the simplest numbers to keep an eye on throughout your retention campaigns. But if you want to know how much you grow in future, you need to understand your starting point. So, before you do anything else, measure.

  • Net Promoter Score. NPS will help you understand the drivers behind your retention rate. But this will be the most complex part of your loyalty program. Your first NPS survey will require you to implement your survey design, reach out to customers, and more.

You don’t have to do that alone. At CustomerGauge, we have many resources on how to build the most effective customer retention survey. Download our ebook, The Fine Art of Surveying, to get started.

  • Other customer experience metrics. While NPS is the most important CX metric out there, it’s far from the only one. Customer satisfaction (CSAT) and customer effort score (CES) can both be very helpful to get a full picture of your customer sentiment.

Find out more: NPS vs CES vs CSAT: Which Customer Experience Metric to Measure?

Now, with this data in mind, it’s time to plot where you’re heading.

3. Set Customer Retention Goals

It’s normal that your overall goal might be to simply “boost customer retention”. But based on the data you’ve benchmarked, you might have more specific goals you want your program to achieve.

These can come in all shapes and sizes, focusing on:

  • Different customer segments. Do you want to build retention within a specific demographic or customer type? For B2B brands, you could target organizations with over 500 employees, or SaaS businesses specifically.

  • Different products or drivers. Have you seen that customer retention suffers due to customer service or product setup? Or does your premium service have lower retention than your basic plan? With this information, your goals might target a specific touchpoint in your business.

  • Revenue goals. More generally, perhaps your customer experience program is designed to support overall growth.

Whichever your goal, make sure it’s aligned with your overall business strategy. This might sound obvious, but our experience shows that it isn’t. In fact, our research for our report, The State of B2B Account Experience, revealed that only 20% of B2B brands are sure their entire organization understands how CX goals support their strategy.

4. Invest in a Customer Loyalty Tool

Finally, it’s good to know that you don’t have to do all of this by yourself. Particularly in B2B contexts, where customer accounts are complex and diverse, keeping track of the range of client experience can be tough.

That’s where tools such as Account Experience can help. Our customer retention platform takes the complexity out of managing your loyalty program. Automate your CX processes, manage surveys, and get insight into the revenue impacts of your efforts all in one place.

By using Account Experience we helped one client go from losing their biggest client to achieving a 100% retention rate. Find out how we did it here.

Kicking Off Your Customer Retention Program

With your preparations complete, you’re now ready to kick off your customer retention machine. We recommend you do this using the three steps of our Account Experience program: Measure, Act, and Grow.

5. Measure

All customer retention programs should begin with measurement. And you’ll have got started with this in step 2 above. Yet retention is not something that you will just measure once. Instead, it’s crucial to keep your finger on the pulse of customer retention right the way through your program.

Here are some tips to keep in mind while monitoring your NPS performance:

  • Combine relationship and transactional surveys. Relationship surveys are great for understanding your continued NPS performance over time. But transactional surveys can gauge customer responses to particular transactions—like delivery, purchase, or customer service interactions. Using them both will give you a better sense of your retention.

Learn more about the two types of surveys here: Relationship vs Transactional Surveys

  • Send surveys regularly. We find that sending quarterly customer surveys improves engagement rates and retention too—by as much as 51%.

  • Maximize contacts within your accounts. For B2B brands, surveying one contact in each customer account is not enough. There are so many stakeholders in each customer account, all with an opinion on your product.

To boost retention, you want to hear as many of those opinions as possible. In fact, our research shows that companies who survey multiple contacts see a 18% higher retention rate.

  • Link CX data to revenue. It’s worth repeating. Your customer retention program will be limited unless it’s linked to financial data. For example, you’ll need to know if it’s your biggest clients that are churning. And only by linking CX data to revenue can you know that.

6. Act

After measurement, a crucial part of your customer loyalty program will be action. Yet an astonishing statistic from Gartner suggests that’s very rarely done. While 95% of businesses ask customers for feedback, only 10% act on it—and only 5% tell their customers what they’ve done.

This is simply a waste. Because one of the key ways to build retention is to show customers you care about what they say. And the way to do that is to close the loop.

Every part of your business should be involved in closing the loop with customers—from frontline staff to managers to your C-suite. Only 26% of B2B brands close the loop with all customers. But by doing so, you can improve your NPS by 15 points on average, while boosting your retention by 8.5%.

A customer experience management tool can make this much easier, by tracking your response rates and automating your closed-loop feedback.

7. Grow

Finally, where Account Experience differs from conventional customer retention programs is the insights it gives you into opportunities for growth. That’s because we built the methodology with revenue in mind.

After measurement and closing the loop, it’s time to put strategies in place to grow:

  • Focus churn-cutting efforts on the most valuable clients. By linking up your CX data with revenue metrics, you can see which customers are at risk of churn and how much they’re worth to you. Start your retention-building efforts with the highest-value clients, to ensure they stay on board.

  • Identify opportunities for reselling and referrals. Once you’ve sorted your detractors from your promoters, work to nurture your relationship with your most loyal customers. They’ll be your best opportunity for resale growth and referral campaigns.

  • Improve the drivers that are costing you the most. If a specific touchpoint is causing the most churn, intervene to improve your customers’ experience as a priority.

How CustomerGauge Can Help

Building a customer retention program takes time. Yet you don’t need to do it all by yourself. With CustomerGauge, we can take the complexity out of your customer loyalty efforts, by enabling you to survey customers, close the loop, and identify opportunities for growth, all on a single platform.

We’ve been repeatedly ranked by Gartner as the best customer experience platform for B2B brands. Book a meeting with our experts to find out why.

About the Author

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Ian Luck
Ian has been in the CX market for over a decade evangelizing best-practices and strategies for increasing the ROI of customer programs. He loves a loud guitar, a thick non-fiction book, and a beach day with his family. You can catch him around the north shore of Boston, MA.
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