How to Increase Your Customer Retention Rate


No business wants to lose customers. But before throwing more money at the marketing and sales departments, have you ever looked at why some customers churn?

Even with excellent onboarding techniques and being there to help the customer settle in, it can be a little baffling why customers still leave you.

Generally, businesses are more interested in what’s coming in at the top of the funnel.

You can have the perfect funnel in place: marketing helps generate a new lead and nurtures them. They hand them off to sales, sales carefully handles the customer through their many segments and moves them into their first account.

There is often a lot of persuasion, and ‘massaging’ a customer to try and get them to buy a particular product or service.

But after all that effort from the top of the funnel, you find that in two, three or four months time, that customer walks away because the fit isn’t right.

How to Increase Your Customer Retention Rate

I’ve distilled down our best 5 tips covering how to increase your customer retention rate and stop your customers from leaving you.

At Customer Thermometer, we are privileged to work with some of the most successful customer-focused businesses in the world, and these are our tips and reflection of what they all do to keep their customers, and keep them coming back.

1.  Make a customer, not a sale

Sales people are incentivized to win business, but this isn’t the way to retain customers.

But as a result, there is often a lot of persuasion, objection-handling and ‘massaging’ a customer to try and get them to buy a particular product or service when, actually, in two or three or four months or a week’s time, that customer walks away because the fit isn’t right.

Deals have to be win-win. The key thing is, yes, the salesperson may have made their quota, but actually, the cost of that sale and the length that the customer stays with you, is it really worth it?

Sales teams are better off being incentivized to find that real win-win as opposed to fitting round pegs in square holes.

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Defining the ideal customer is critical for getting them in the door and then, crucially keeping them.

If your sales team can be incentivized to win longer term customers, or contracts based on lifetime value, it will help all concerned make the right choices about the kind of business that gets sold.

In turn that will make a customer for life, rather than a sale for the quarter, eminently more likely.

2. What the service recovery paradox means to your business

We’re all consumers. We all experience problems with suppliers, be it retailers or the service industry, wherever it may be.

Problems occur every day and it’s how you deal with those problems which separates the “men from the boys”.

What’s fascinating is not the fact that problems occur, but actually it’s how you fix those problems when they do happen, that counts.

This graph of the service recovery paradox demonstrates the principle very well:

Understand the service recovery paradox to increase your customer retention rate

When things go wrong, you see that line taking a big dip as that loyalty starts to disappear. But if you deal with it well, you apologize, you offer a discount, you do everything in your power to make that customer happy again, you will find they become even more loyal.

There is even more chance of them actually remaining with you because of the recovery work you’ve done.

3. Why support is more important than sales

We’ve all been in a store and had to ask someone for help to find an item.

What’s great is that rather than being told that it’s in aisle three next to the bacon, the attendant will usually stop whatever they are doing and they will take you to that item. Then they will ask you if you need anything else.

That simple kind of customer support drives real advocacy and increase the chance of retention.

When you work on that front line with your customers, if you go the extra mile for support, you really start to learn what customers are looking for and what they’re thinking.

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If you apply the same model to some of our online colleagues and partners, the likes of Zapier, the likes of Jason Fried’s Basecamp, you will see that every single one of their team rotates around their support environment. They get to find out what customers are saying on the front line.

Why is this important? Because you can go back to your day job and actually relate to what customers are asking for.

It’s very easy to receive things from support and say, “Hey, this is what’s going on.”

But when you actually experience it on the front line, it’s a completely different thing. It actually helps you get closer to customers and it helps you do your job better to ensure that those customers remain with you.

So, be generous with your time, go the extra mile on the support side of things.

At Customer Thermometer, we have a Minister of Magic.

That is his department; Jake runs the support department, and he will always go the extra mile. He’ll write something cheeky. He’ll put an interesting quote in the email. The fact that he is called ‘Minister of Magic’ I think says it all.

Our support is equally, if not more, important than our sales function.

4. Encourage complaints to increase customer retention

I had a wonderful conversation with one of our customers recently. He said to me, “Mark, I love the service.”

Then he said: “But”.

I hesitated, and he said, “I just wish we got more negative feedback.”

He loves getting the gold stars, but actually, he realized he learns even more by getting the bad stuff through.

Imagine you’re in a restaurant. Your meal has just been brought to you at the table. It’s pretty average; there’s nothing special. It is unspectacular in every way.

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Now, I’m British, and we’re not very good at complaining. Typically what might happen is the waiter will come over as they do after three or four minutes and say, “Hi, is everything okay with your food?”

The diner in a British way will go, “Sorry, yes. Yes, no, it’s fine. Thank you,” and hope the waiter goes away quickly. Why? Because we don’t want to make a fuss. We’ve got a team, friends or business colleagues there.

What you then do, is go home and jump on Trip Advisor or something equivalent and have a little bit of a rant. You certainly wouldn’t be giving them a good rating.

Customers love giving feedback. You just need to provide the right mechanism and get the timing right too. Then you’ll get the results.

5. Don’t allow surprises to throw you off track

An all-time hero of mine, England Rugby coach Sir Clive Woodward, talks in his recent book about how the unexpected can throw even the best-performing teams off their game.

He tells a story about the 2004 Olympic diving final. The competition was disrupted for about two and a half hours since this particular person got up on the diving board and made a fool of himself.

After that happened, every top diving team dived badly, because their concentration, their routine, both physical and mental, had been completely disrupted.

Customer service is straightforward when things are going well. It’s when the unexpected happens, there’s a failure or a major event, that the rubber hits the road.

Discuss a few curve balls with your team to see how you’ll all cope and what you’ll do.

Watershed events and how you handle your customer service during these times is a major factor in customer retention.

Watch the recording of the webinar for even more tips about how to stop your customers from leaving you.

*How to Increase Your Customer Retention Rate is a guest post by Customer Thermometer.

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