August 8, 2013

15 Customer Retention Strategies that Work

15 Customer Retention Strategies that Work

Customer retention is incredibly important for growing a sustainable business, but before we look at some strategies for improving it, let's put an important data point front and center:

According to the Harvard Business School, increasing customer retention rates by 5 percent increases profits by 25 percent to 95 percent.

This is important to consider when evaluating your own customer loyalty strategies because in the customer service echo-chamber there is a lot of "hoo rah" about taking care of customers, but little discussion on the business side of things.

At Help Scout, we do things differently; we're all about loving customers, but we also aim to prove that great service is more than just the right thing to do—it's also good business sense.

In order to help you increase your own retention rates, we've compiled a list of our 15 favorite tips (backed by academic research and case studies) on increasing customer loyalty, divided into five easy-to-browse sections.

Let's begin!

Communication

It's hard to create loyal customers if they aren't paying attention to you. Given this fact, below are our favorite bits of research on clear communication with customers.

1. Stand for something.

The quickest way to get customers to ignore you is to not stand for anything. A study by the Corporate Executive Board that included 7,000 consumers from across the U.S. found that of those consumers who said they had a strong relationship with a brand, 64 percent cited shared values as the primary reason. If you want loyal customers, you need them to care about you ... so what do YOU stand for?

2. Utilize positive social proof.

While negative social proof ("Nearly 90 percent of websites don't use heat mapping software!") has been proven to dissuade customers rather than encourage them, numerous studies on customer motivation have shown that positive social proof ("Join 20,000 of your peers!") is often the most effective strategy for getting people to listen.

3. Invoke the inner ego.

Despite what we often say, most people like things that resemble them in some way. This cognitive bias is called implicit egotism, and is an important thing to keep in mind when communicating with customers. In order to attract the sort of customers you want, you need to identify your target customers down to the last detail and then craft a brand message that perfectly matches their pains, goals and aspirations. It's easier to fill this existing demand than to create one.

Selling

If customers don't enjoy your selling process, they'll likely never do business with you again. Thus, selling to customers the "correct" way is an integral part of creating customer loyalty. Below are a few studies to help you improve the process.

4. Use the words they love to hear.

Not all words are created equal. Certain persuasive words encourage customers to buy more than others, in particular: free, new and instantly. When customers hear these words (and the promises they imply are backed up), they'll enjoy their purchases more than they would have otherwise.

5. Reduce pain points and friction.

All businesses, no matter the industry, are going to have to sell to the three types of buyers that are out there. According to neuroeconomics experts, nearly a quarter of these buyers will be conservative spenders, or "tightwad" customers. George Lowenstein of Carnegie Mellon University recommends using bundles, reassuring words (e.g., change "a $5 fee" to "a small $5 fee") and reframing as strategies to better sell to these conservative buyers. Read more about his advice here.

Reciprocity

Reciprocity is the social construct that makes the world go 'round ... or in your case, keeps your customers coming back. The premise is simple: Go above and beyond for customers and get rewarded with repeat business. The execution, however, can be trickier, so below is a compilation of interesting research on how to improve reciprocity with your customers.

6. Realize that budget is negligible.

Giving back to customers can appear incredibly costly, but it doesn't have to be. Instead, embrace the art of the frugal wow by understanding that reciprocity is built even with small 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!).

7. Utilize surprise reciprocity.

Although reciprocity works incredibly well on it's own, research shows that it is even *more* powerful when started by surprise. For a simple example, 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 left a strong impression on you.

8. Make it personal.

In a study from the Journal of Applied Social Psychology, researchers found that waiters could increase their tips by 23 percent by the simple act of returning to tables with a second set of mints. So do mints have magic powers? Apparently not: The researchers concluded that the mints created the feeling of a personalized experience among the customers who received them. So it was the personalized service received that made them enjoy their experience so much more.

Support

This one is a no-brainer: You can't create a tribe of loyal customers without an exceptional customer service experience that keeps them coming back. In this section, we're going to bust a few customer service myths wide open, as well as tackle some important things you need to keep in mind when offering support online.

9. Speed is secondary to quality.

When it comes to customer service that keeps people coming back, the research shows that quality matters more than speed. According to a study by the Gallup Group, customers were nine times more likely to be engaged with a brand when they evaluated the service as "courteous, willing, and helpful," versus the "speedy" evaluation, which only made customers six times more likely to be engaged.

10. Customers enjoy businesses who know them.

Telling your employees to spend more time with customers might seem like folly, but smart entrepreneurs know that isn't the case. Numerous behavioral psychology studies have shown that everybody views their service experience as more positive when they don't feel rushed or ignored. Don't spend time idly, though; have employees attempt to find out key customer traits, just like Derek Sivers did with his employees at CD Baby.

11. Choose the right platform.

The best way to improve your online customer service efforts is to utilize the channel your customers most prefer. Although recent research has shown that a majority of people still prefer and use email more than other services (including social networking), you need to pick the channel that makes the most sense for your business. Hosting companies know that online chats are critical when their customers’ sites go down, but other businesses may have customers who are just fine using email as their primary method of contact.

12. Make it 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 tools like Campfire to access real-time notifications of what's happening on the customer end; we were able to improve our response time by 340 percent by enabling a support room that all employees can access. Read more about how we did it.

Loyalty Programs

The key to creating customer loyalty programs that work is to know why customers use them and what gets customers to keep using them. Below you'll find consumer research that answers these questions.

13. Get people started.

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 wall that prevents customer loyalty programs from sticking is getting people started. They've shown through their notorious "car wash study" that people are twice as likely to finish loyalty cards if they are automatically started (or rewarded) as soon as they sign up. Read more about this process here.

14. Get ideal customers to be VIPs.

Additional research by Nunes on loyalty programs has shown that people just love being VIPs or gold members of programs. 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 lesser silver class.

15. Label your customers.

A research study on voting patterns conducted by Stanford University conclusively showed that people are more likely to participate in something if they are labeled with a positive trait. Our friends at Buffer refer to their premium customers as "awesome" members, and even label their upgraded payment plan as the "Awesome Plan"—a much easier phrase to embrace than "paid member."

Your Turn

What are some other customer retention strategies that you use and would recommend?

Let us know by leaving a comment below!

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Written by Gregory Ciotti Greg ciotti

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25 Comments

George Jan 9

Gregory,
Just wanted to let you know I really enjoy your writing, just found your site a couple days ago, read one eBook already. Your content is full of useful information yet it's straight to the point which makes it a pleasure to read.

PS: I didn't want my email address to show up here so I just entered a fake one (you know how spammers are). If they don't show up, you should say that in this comment posting form, I'm sure others have the same concern.

Keep up the great work!

Gregory Ciotti Jan 9

Thanks George!

BTW, although the form asks for an email, it's never publicly shown, and we never do anything with commentor emails, so you're safe with us. :)

Dr. Erica Goodstone Jan 9

Gregory, I really appreciate how freely and openly you are sharing these strategies. You are giving me a lot to think about. A small shift in the presentation can make a huge difference in whether someone feels compelled to join and to stay or remains detached.

Warmly,

Dr. Erica

adrian Jan 10

This was a really great article. Does give you some very useful information. Thank you for sharing and I also enjoy your writing style.

Gregory Ciotti Jan 11

@Erica & Adrian - Thanks so much! Glad you guys are enjoying our articles. :)

Michael Sato Jan 12

Great 15 tips you have here to retain customers. Particular love the part quality vs speed. Customers that go had quality interaction feels more trusting and confident with your business and they usually don't mind spending time as long as it's worth it.

Amanda Dyer Jan 12

Very insightful, well-researched strategies. There are several I want to implement in my business right away.

Connie Chandler Jan 15

Not sure what category you would put this in, but we make it a point to never say "NO" or "we can't do that". Rather we tell them what we can do for them that could still meet their needs.

Layla MH Feb 19

Hi Gregory, I just want to express my great gratitude for all information you shared with us, I just found your blog today and its really really insightful and helpful.

Minnie Mar 6

buyers will be conservative spenders, or "tightwad" customers.

Haha! Love it! Keep them coming, will keep an eye out for future articles.

Minnie

Baidya Mar 28

I am not a marketing guy, rather tech support and recently been assigned with retention. Found this will help me and still reading more articles from customer service advice category from here.

julius Jun 12

This article is wholesome. i like it .

Customer Intelligence Solutions Jul 5

These strategies could be useful in keeping customers happy which might result in referrals. Great post.

Robert Graham Jul 7

These are some great tips. I especially think that a more intensive on-boarding program for new customers is key. Your highest churn level is usually in early customers and you can minimize that by focusing attention on those customers.

Stephan Boehringer Aug 12

Gregory:
This is a great post. I did want to add that we have found that double-loop loyalty programs tend to work the best, meaning you offer the referrer something, as well as the person being referred to. Our local Outback Steakhouse gives you a $10 gift card when you buy a $50 gift card for someone else.

Also, Greg, may we share your post on our blog? Please let me know I'd like to share your insight with our readers.

Thanks, Stephan

Jonathan Okwany Oct 6

One Of The Ideal Tips To Retain A Customer Is Continued After Sales Service, For Example, We Always Check On Our Customers To Ensure They Are Having A Nice Experience Using Our Products, If There Are Any Short Falls We Correct Immediately Thus This Makes Clients Know That We Value Them Continously Even After A Sale Is Made,

Max G Oct 20

Can anyone advise or give feedback? Retention programmes that give a FREE starter gift that is refillable every 4-6 weeks for free, do they engender the same retention/loyalty towards a retailer or does loyalty decline over time? (Our example is a refillable spectacle lens cleaner given free when a customer purchases expensive spectacles). Our hope is to get to know more about our customers likes & dislikes by their frequent visit to collect a refill - not hard sell, simply rapport and have visible messages in the shop to drive enthusiasm to purchase.

anjali Oct 26

Does MLM selling encourage customer loyalty more than traditional methods of selling ?

Capulett Nov 11

Very good summary! I'm particularly interested in tools and platforms that can facilitate businesses collecting customer feedback easily and quickly. A tangible and realistic reward like cash can be used to encourage customers to spend time and effort.

Amita Pawar Dec 5

Logical & applicable terms suggested. They are helpful.

Danielle Feb 11

Thank you for sharing! I just started a customer service position with a company I hope to advance in, these tips will help even at my level, providing better service at the front desk.

Lauren Feb 26

Wow, those are an amazing tips. Really like them, because they sound so easy! But retention isn't easy, unfortunately. But there's a lot ideas to try. In my case: I decided to stay close with my customers - online. It meant to be wherever they are. So I spend some time on looking for the right tool which would scan the web and give me concrete places where my customers are (it was tough, but https://colibri.io works great, I'm really pleased) and started to talking with them. Share my experience. Answer thei questions. When your customer see that you are ready to take part in his enviroment, when he see that you are trying, learning everyday - you are the winner.

Nitin Verma Mar 18

Informative, crisp and very useful indeed. Send some more database for reference.Will be helpful. Thanks !

Victoria Kats Apr 1

Retention is my primary business goal this year. This is great info to get me started. Thanks!

suhas Apr 22

i was not go retail business. but somewhere i saw the article long back. i remember car stamp example and traced the account and read it fully. shortly we are implementing loyalty program. got right information in right time. full 10 of 10 rating to the article. thanks

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