Customer Retention is a big deal for any business, but it is especially huge for businesses that operate with memberships, or subscription-based models.
Why You Should Care About Customer Retention
If you don’t know your customer retention rate and you operate a subscription-based business model, then you really should take the time to crunch the numbers. You may be losing a significant amount of customers and revenue right out the back door of your business, and you would be surprised how quickly that lost revenue adds up. One early indicator of a customer retention problem is if you are making loads of sales each month, but your revenue has remained relatively flat. This would be a pretty clear sign that you are losing customers out the back door of your business. Check out this article to see how you can easily calculate your customer retention rate.
Once you know your retention rate, you can easily calculate how many customers are walking away from your business each month, and as a result how much revenue they are taking with them. Admittedly, these are not fun calculations to do. No one wants to sit down and get face to face with how much money their business is losing, but if you want to build a thriving sustainable business, it’s an exercise you simply can’t ignore.
What Does This Mean?
So maybe you just calculated your customer retention rate and discovered that it is much too low for your liking. Maybe you were even able to put a dollar amount to your rate and realized that it’s a 6-figure number! So you may be asking yourself, ‘What is happening?’ Here’s what we have learned after 6 years of trying to solve this problem. At least half of the customers that are walking out the back door of your business, don’t want to walk out! They have simply experienced a payment failure, which can occur for a number of reasons. Perhaps their credit card expired, maybe it has been a lean month for them and the payment failure is due to insufficient funds, or maybe they had to shut the card down because of fraud. The point is simply this, not every customer you lose is the result of an intentional effort on their part to purposefully disengage with your business.
So What Do I Do About It?
The first thing you should do is to get intentional about solving this problem. You have to have a plan. And that plan should include a strategic follow-up system that optimizes multiple touch-points from you to your customers. This should include email, text, phone, etc. You should be touching base with your customers in as many ways as possible, especially when you’re dealing with a failed payment. The other thing to keep in mind is to do all of this quickly! The quicker you can touch base with your customer the more likely you are to get the payment back online and the longer that customer is more likely to stay. So speed is of the essence!
1 Little Know Tip
But perhaps the most important thing you can do, is to simply approach your customer with empathy. When most businesses encounter payment failure, they come in with guns blazing. It’s true, you did provide the service or product and the customer is not keeping up their end of the bargain, but using a threatening tone or fear tactics to recoup a failed payment is a sure-fire way to keep your customer retention rates low. We have found that most customers either have legitimate reasons for their failed payment, or were completely unaware that their payment failed in the first place. Neither case requires anything other than empathy.
So try these three things:
1. Build a system to follow-up with payment failures.
2. Hire someone to stay on top of it, and to execute your system quickly.
3. Use empathy when speaking to your customers. You’ll be pleased with the results.
At gravy this is what we do day in, and day out. We can handle all of this for you with a 100% U.S. based team that will integrate into your business and uphold the highest level of customer service. All while implementing the proven systems that we have developed over the last 6 years. Book a discovery call using the link below and we will do a free payment recovery audit on your current system and help you to optimize the current system you are running. We are passionate about helping business owners succeed. And helping to solve one the biggest problems in small business today is one of the ways we can do just that.