Our 2018 business strategy looks like this: customer retention.
We’ve spent a decade putting new business first, plowing our efforts and resources into marketing and advertising, reports Forbes.
And it’s a strategy that, until now, has worked. Customer acquisition has fuelled our growth and our revenue rose to $5.6million this financial year, up from $3.75million last year.
But when you focus so pointedly on one growth area, the risk is you drop the ball on others. Late last year, we spotted that our customer retention had been quietly slipping. No disastrous drop offs but not an upward trajectory, either. It’s a puzzle we must solve, or our growth will slow.
And so we’ve embarked on a collective mission. The whole business is now focused solely on reducing our churn rate and looking for innovative ways to cultivate meaningful and lasting relationships. Anything that works, we’ll roll out across the board.
I fully accept balancing retention and new business is crucial, but without doing everything within our control to create loyalty, we are making life harder. Loyalty brings new customers via recommendations – 55% of US consumers recommend brands or organisations they are loyal to to family and friends, and 12% publicly endorse it on social media, according to a report by Accenture – and it is vastly less expensive than acquisition.
While we won’t decrease our marketing and advertising budgets, we won't increase them either, and all our targets as a team will be retention focused. Nearly 80% of companies spend less than 30% of their time and budget on customer retention-focused messaging and content, found Accenture’s report. By contrast, we plan to devote 70% of our time and budget to it.
Our efforts actually began in Q4 with preparation for our 2018 objective. Clearly, raising awareness of our goal internally needed to be step one. And so, as a group, we mapped out the components of our customer journey with a ‘flywheel’ - an idea we've borrowed from Amazon.
The theory is, once you have all your core components in place and working seamlessly and harmoniously, innovation and change fly out of the wheel, as a knock-on effect. In this case, our goal isn’t innovation and change, though that would be a bonus. Instead, emblazoned across our flywheel are these words: “Increasing our retention from 90% to 95% would double our growth.”
Our flywheel charts 20 points when our customers – who are time-poor small business entrepreneurs as well as busy employees at companies like Google and Facebook – might leave. Every morning we have a team brainstorm about one item on the wheel, pooling our observations and ideas.
This exercise highlighted that most customers who leave do so within the first one to two months and typically they are those who don’t get very far into the journey. They might sign up, be assigned a virtual assistant and then ‘never really get started’. They might not know what or how to delegate without encouragement.
We also hired an expert well versed in the psychology of customers. From him, we learnt that customers very rarely tell you why they're leaving unless you really push and push for an answer - which has exposed a lot of useful information for us.
He also taught us the art of creating memorable 'high points' in your customer relationships. If you can delight a customer every three to four months with your service they are more forgiving, as well as more loyal.
He also taught us the value of picking up the phone to create real human connection. As a technology business, this is not something we have done much of unless specifically requested, possibly because we felt it conflicted with our message that your working life can be easier when it’s virtual.
But the minute we started doing this, our churn crept out of the red, and began to flatline. It’s easily one of the most powerful things we've changed. Just calling new customers when they first sign up has doubled our retention.
We’re also hoping to futureproof our loyalty tactics. Accenture’s aforementioned report found that millennials – our current and future customers – have different values and behaviours than others. They value celebrity endorsement over lower prices and personalisation over product and service quality, for example. They are also quicker to switch away, and have much higher expectations of a flawless performance than other age groups, who are more forgiving.
This means we need to get retention right now and, in doing so, we will weather-proof our business against future storms. Fortunately, we’re a small business, and capable of changing at pace, but we won’t be dropping any more balls in 2018.