Updated: Feb 27, 2020
It all started with a very unsatisfying answer to a very common question.
Q: What’s the right customer retention strategy for my company?
A: It depends.
As a consultant and adviser I sometimes feel the need to have all the answers. It’s a big part of my job. But even in my more narrow universe of high growth B2B companies there is no single answer that is good enough to drive successful strategy for even a handful of the leaders I speak with.
Instead, I set out to answer the next question; the one that truly matters in this case:
Depends on what?
Thus started a long series of interviews, coffee dates, and even one happy coincidence on a flight from Omaha to Baltimore. I began asking every colleague, mentor, client, and prospect about how intentional and mature they were about customer retention and how this informed their strategy, structure, people, process, and technology.
Answering depends on what? is both more satisfying and more productive. The collective wisdom and experiences of those I spoke with suggest that successful customer retention strategies acknowledge three areas:
Your Product or Services
Your Expectations of the Customer Retention Team(s)
In hindsight, this perfectly explains why a one-size-fits-all retention strategy is so elusive. The variation among B2B high performers across these three areas is nearly infinite. Revealing these truths is more of a “well, duh.” moment than an “aha!”. Of course, the unique aspects of our customers, our products and services, and our current decisions about who’s responsible for customer retention will inform our strategy. Fortunately, there is also clarity beneath the surface of these three areas. What, exactly, should your organization take into account in each of these three areas to boost customer retention?
Our wealth of customer data--and firmo/demographics in particular--can pare down to two key attributes that most influence retention strategy: the number of customers you serve, and their perception of the cost of your products and services.
Imagine two thriving B2B companies--one offering streamlined text analytics to 30,000 SMBs and one offering a suite of data and information security solutions to ~100 enterprise customers. The impact of customer retention to each company may be the exact same but they should consider very different paths on structure, people, process, and enabling technology to achieve their goals.
Your Products and Services
The array of products and services in the B2B ecosystem is dizzying. But again, the impact on retention strategy isn’t about the type of product you put in the market. Instead the two key product and service attributes that inform retention strategy are the inherent complexity of the product itself and the impact of the product/services on the customers’ operations.
Using the same example as above, the text analytics provider fields an intuitive tool that almost any user can successfully adopt using any web browser. Users love the tool and find it helps them see patterns in their communications with their customers. All good things, but likely more of a nice-to-have. The enterprise data and info sec provider offers a highly specialized solution--one that requires some expertise on the customer side to be fully effective. Add in the critical nature of data and information security and it’s clear to expect two very different strategic retention approaches to emerge.
A favorite insight from the interviews and related research into building an optimal retention strategy is the importance of our own expectations. Each company, heck--even each leader in the same company--places different expectations on the people and teams we serve. For the purpose of retention strategy the two expectations with outsized influence are around revenue contribution and the metrics used to gauge the performance of teams and individuals.
Retention teams with large and direct revenue expectations are inherently different than those seeking to influence customer behavior and perception. One is a sales function and the other is a success function. The personnel profiles, processes, and even the technology tend to be different too. On the metrics front it’s no surprise that what gets measured gets managed*. Firms measuring customer sentiment as their north star (NPS, CES, etc.) employ different processes and personnel than those measuring customer behaviors (usage patterns, referral frequency, organic growth, etc.)
The three areas above cover a lot of ground and the companies and leaders I spoke with boost their retention outcomes by understanding and accommodating all three. In addition, the intersection points between your retention team(s) and Product and Customers also provides an opportunity to understand and accommodate your unique situation. These intersections can--and probably one day will--be an entirely separate article. But for now each of these three factors can also inform your retention strategy:
Your team’s ability to influence customer behavior
The customer’s perception of tangible value provided by your retention teams to their business
The quality and quantity of customer intelligence (not just data) your product can feed into the retention process
Taken as a whole, the three areas and intersections can be displayed as a model:
Figure 1: Customer Retention Strategy Factors
Your customers, your product, and the engine you built to hold it all together. It makes intuitive sense that understanding these three areas is essential to effective customer retention planning. And for more good news? Far from the dead-end of It depends, you DO have the answers you need to craft a winning strategy for sustainable customer retention and growth.
* Peter Drucker in The Practice of Management
See how your CUSTOMERS influence your retention strategy
See how your PRODUCT influences your retention strategy (coming soon!)
See how your TEAM EXPECTATIONS influence your retention strategy (coming soon!)