You might want to re-think your customer retention strategy
If your customer attrition rate is higher than your competitors or if a well-meaning executive has decided to reduce the percentage of customers who leave – then the chance is that successful strategies to reduce customer churn are a priority.
There is plenty of information out there. There are many guides with “the 15 tactics to keep customers …. Or something like it.
Nothing wrong with these specific tactics as far as they go BUT it’s almost certainly looking at the situation from the wrong perspective.
Let’s imagine a hypothetical survey with a sample size of 200 couples. We split them into two groups and ask one group to consistently work on a happy marriage, and the other 100 to work on their marriage, by ensuring their partner never leaves.
You already know the result. It’s difficult to see how the sample group who adopt the “never leave” strategy would ever attain much happiness or indeed, that their relationships would last as long as the other group where happiness was the only focus.
So why on earth do we try and extrapolate this twisted thinking into the business world?
Most customer retention strategies are designed to lock customers into a relationship through mechanisms such as pricing – reductions for annual plans vs monthly subscriptions for example – or by bombarding them with email discounts that are so frequent you question whether anyone would ever pay full price for their products.
None of this is particularly focused on the happiness of the key party in the relationship, the customer.
Don’t get me wrong, price discounts are a tool in building loyalty. One of my colleagues effectively offsets the cost of his mobile phone rental through the notional freebies he gets from coffee shops and pizza chains funded by his mobile supplier’s discount scheme. You can argue that in this case these benefits enable him to distinguish between providers that are much the same as each other – and that feeding his caffeine addiction keeps him happy.
And retaining customers takes second place to acquiring new ones – witness the many discounts designed to incentivise new customers (BT, I’m talking about YOU, but there are many others). Growth is important, obviously, but if you neglect your existing customers – estimated to be 5 to 25 times cheaper than acquiring new ones – they’ll drift away when their annual plan, or their new customer discount, expires. And implementing your growth strategy will be way more costly than it needs to be.
Does your retention strategy focus on making customers happy or forcing them to be “loyal”?