This quote by Harley Davidson’s president, John Russel, should hang on the wall of every executive concerned with customer retention:
“The more you engage with customers, the clearer things become, and the easier it is to determine what you should be doing.”
Especially in the world of enterprise software, there are numerous ongoing touchpoints in which your marketing, sales, training, and support teams all engage proactively with your customers. While each engagement has its own purpose and goal, they can all yield one potential benefit: They can be tracked, documented, organized, and summarized.
The result? Meaningful insights into the most effective strategies to create, maintain or boost high customer retention rates.
Requiring teams to submit customer retention metrics as part of their KPIs will help improve overall strategy on both the micro and macro levels and create a corporate mindset of considering those customer retention KPIs in every business decision and activity.
Before reviewing our list, let’s focus on one key concept: centralized ownership.
The larger your company, and the more teams and employees interacting with clients, the more meaningful metrics for customer retention you can potentially generate. But raw data is only the first step. Companies that prioritize the empirical analysis behind retention rates often dedicate one or more staffers to aggregating the data and turning it into meaningful reports and summaries that indicate clear trends. Without this critical role (and the feedback to Management it provides), employees might quickly lose interest and motivation to keep investing their time in collecting data no one is harnessing.
As for the technical infrastructure to make this happen, there are three options to consider when planning how to track customer retention:
While every company is unique, all metrics below play a role in the decisions you make regarding customer retention.
Some attrition is natural due to inevitable business realities – these can be marked and “discounted,” so they are not necessarily tagged as a failure. But when a client leaves because of a negative experience, pricing, inadequate training, or a competitor’s pitch, these events need to be logged and learned from immediately; they can impact both long-term and short-term strategies.
Note that while churn isn’t too complex a metric to confidently measure, determining the cause can be – especially when those multiple touchpoints by various departments all contribute.
However, even when you keep the client, you need to track the revenue coming in, and its own churn rate. Whether from renewals, additional licenses, new products, or support and training contracts, a client that suddenly spends half as much over a given time is almost the same as losing a client half the size. The flip side of this is repeat purchase/renewal rate, a rock-solid indicator that you are doing something right and that retention – at least for this client – is not at risk.
o Training: Well-trained customers are confident in their abilities to get the most out of your product. When you train with engaging, hands-on software platforms, users get first-hand experience by interacting with a live version of your product. Instead of a passive “lecture,” they can explore at their own pace and schedule, focusing on the elements most relevant. This type of training improves the chances of users solving their own problems and empowers them to help colleagues and serve as advocates for you. That leads to a drop in support calls and a jump in retention.
o Quality of UI or documentation: Both the user interface and documentation must remain fluid, organic, frequently updated entities that improve as feedback from real-world usage comes back from clients. As such, a key KPI for the Support team is to record the number of calls they receive on a given feature or function, so that the stumbling blocks can be removed through iterative improvements. The updates contribute to the retention of current and future clients as well.
o Sales/Marketing claims mismatch: Every salesperson is eager to make the sale, and very often there is a tendency to force-fit a solution into a need or overlook key requirements and downplay limitations or the absence of features. While this short-term strategy may boost initial first-time numbers, the subsequent hit on customer retention can be painful. Marketing and sales need to be aligned on what they ought to be saying and what may not be an honest, productive approach. Both should be tracking the metrics that indicate either a lost sales opportunity or a lost customer, and check if they were lost due to frustration regarding expectations about what the product can actually deliver.
There are four key ways in which your customers themselves can provide invaluable insight into retention trends. While many companies look at this input as a general “vibe,” there are actually empirical feedback metrics that help those wondering how to measure customer retention rates: