Written by JENELLE DEMARCO 04/05/2021

The question is simple, how to improve customer retention in your business? Surprisingly, the answer to retaining more customers is a simple one.

I will share my experience regarding customer retention and my strategies to improve it. I have had years in customer and technical support, and have seen first hand what leads to lost customers, and on the flip side what leads to retaining customers for the long haul.

First I will explain the ways in which lead to a higher churn rate, basically the things you should never do. Then I will provide a clear overview of my recommendation to avoid customer loss.

What is Customer Retention?

Customer retention is the ability of an organization to keep their customers and not lose them as a paying client. Customer retention can also refer to the process in which a business attempts to retain a customer who already requested cancellation.

In the software as a service (SaaS) industry, it is common to measure customer retention as the calculated churn rate.

The churn rate is a measurement that calculates the number of active customers, the number of new customers, and the number of lost or canceled customers during a specified period of time.

The standard churn rate formula for subscription businesses is total number of lost customers during the month divided by the number of active customers, plus the number of new customers added during the month.

Churn Rate Formula

What Causes High Churn in a Business?

When it comes to SaaS businesses, or subscription related businesses, it is my experience that lost customers are the result of a few things.

Insufficient Product or Service

First and foremost if the product or service doesn't meet the requirements of the customer's needs, that will always lead to a lost customer.

If this is the problem you are facing, there is not much you can do about it without expanding your product's feature set.

Product Adoption Issue

User adoption of SaaS products is always a challenge. More often than not, the leading cause of high churn in a business is that the product can do what the customer needs, but the customer doesn't know how to achieve what they need with it.

This will lead to a lost customer over time if your customer support is not on their toes. This is the most common cause of high churn, and it is clear why. Without customer support, the customer cannot succeed with your product.

In this situation, customer support is paramount and critical. Without amazing customer service many customers will cancel. To avoid this, you need to make your product more user friendly and intuitive, or provide such good customer response times that the customer does not get frustrated and cancel.

There are many things you can do to improve the product experience, which is outside the scope of this article.

How to Improve Customer Retention?

The number one way to improve customer retention and avoid lost customers is to have amazing customer and technical support.

Resolve Customer Problems Quickly

It sounds simple, and it is, but in my experience this is the most sure fire way to avoid cancellations. When a customer has a problem, solve it immediately, and make sure the customer knows it is resolved.

Prompt Responses

When a customer contacts your support team with an issue, request, or concern, you should immediately respond. Even if you cannot solve the problem on your initial response message, that is okay, but it is important the customer knows you are aware of the issue and and working on it for them.

If you cannot solve the problem immediately and send a response message letting the customer know you are working on it, it is imperative you solve it as soon as possible thereafter. Once the problem has been resolved, you should immediately alert the customer, and if possible contact them via phone and walk them through the resolution.

Implement a CRM System

Another way to ensure nothing slips through the cracks and customer issues are being handled quickly is to deploy a CRM software for your business.

Customer relationship management (CRM) systems will improve customer management, and can automate customer communication. These systems can even alert you when too much time has elapsed between your last customer reply.

Final Thoughts

Strong customer retention and low churn rate is critical for the health of a business. To keep your business growing in a healthy direction it is important to constantly work on lowering your average number of lost customers each month.

The best advice I can provide is to have great customer communication. Quick responses and fast problem resolutions will lower your churn rate dramatically.