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Why retention is the new conversion
With the growth of the internet, digital apps, and subscription services, there’s been a sea change in the way companies do online business. More specifically, we’re talking about how companies assess their clientele and build mutually beneficial long-term relationships.
Look at subscription box services, where the secret sauce involves a product that requires replacement or renewal at regular intervals. The goal is to have customers join online so that items are shipped to them continuously. This relationship involves frequent interaction, and during the customer journey, there will be things like product tours, updates, special offers, and more. Even if your product is perfect, it’s a lot of work convincing customers to stick around.
In the past, businesses put a great deal of emphasis on customer acquisition cost (CAC) and how it affected their bottom line. Buying ad space was crucial for lead generation and getting a company up off the ground.
Getting a great product in front of people isn’t enough anymore. More goes into business expansion and, ultimately, increasing profit margins. Whereas people used to buy a product once, and it was considered a success, now companies need customer buy-in for the long haul.
Because so many digital business models rely on repeat purchases from the same people, it’s more important than ever to retain existing customers. Think of a program you use all the time, whether it’s SaaS or something else, and the digital subscription you had to buy for it.
If you aren’t convinced, Harvard Business School has the numbers to prove retention is the new conversion, like the fact that “increasing customer retention rates by 5% increases profits by 25% to 95%.” As an added benefit, “loyal customers also frequently refer new customers to a supplier.” If this isn't enough to get you motivated, will anything?
With such a favorable return on investment and additional perks, companies can’t afford NOT to address customer retention. When brand loyalty is grown strategically, it can reach a tipping point where people start turning into raving fans and power users. Then, they’re hooked.
Intercom has become an industry leader in this space by providing companies the tools and best practices for keeping customers engaged and satisfied. Focusing on retention helps companies stretch the lifetime value (LTV) of a given customer and then reap the rewards.
Just because you’ve acquired a customer doesn’t mean they’re going to stick around. You have to work hard to keep them hooked.
To keep those new customers coming back to your business requires a product onboarding emphasis and a reliable customer knowledge-base, in addition to simple assistive service design.
It’s crucial to understand people who signup for a service then drop off and people in the early stages of a trial membership. By analyzing metrics on a case-by-case basis, product teams can quantify pain points that occur along the user journey. Effective solutions require this kind of user experience strategy.