Customers Inform Your Retention Strategy (but you're probably doing it wrong!)

Updated: Feb 3, 2021


Quick Hits

  • Use your customer count and their perception of their spend to inform your retention strategy

  • If you’re particularly high or low in customer # or perceived spend use the best practices as guidelines

  • Scroll to the bottom for four (4) actions you can take right now to bolster your customer and revenue retention using the factors described in this article


I know. I know. You’re “all about the customer” and already building your success, support, and renewal functions around the customer. It’s a guiding principle great customer experience--Segment and Win! As your customer count grows you segment based on customer attributes and preferences then define the ideal journey for each segment. So, your customer is informing your retention strategy, right?


That’s harsh. Let’s just say You’re not as right as you deserve to be.

To explain further I’ll dive into the two customer factors that influence effective retention strategy (1) Customer Count, and (2) Perceived Spend

Customers are one of three areas--along with your Product and your Team Expectations that influence the ideal retention strategy for your unique organization. That’s outlined in 3 Areas that Inform Your Customer Retention Strategy As with all factors that influence retention strategy, the extremes are more important than the middle. Focus first on those where you’re particularly high or low.

This article details how customer count and perceived spend can inform your ideal retention strategy and recommends best practices for multiple situations.

Your Customer # Matters

This is mostly a math problem and an efficiency decision. You can implement the same approach to retain 50 customers as you do for 5000. But somewhere along the growth path it makes sense to modify the strategy, segment customers, leverage 1:M success, and engage other solutions to ensure your customer growth far outpaces your retention costs.

How do we count customers and define “low” or “high”? This is a function of your industry and market. To keep it simple--If the rest of leadership agrees with your self-assessment--go with it. You’ll want to agree on (1) what “customers” are--companies, decision-makers, users, something else?, and (2) timeframe--are you looking at today, the near future, or further down the road?. I highly recommend doing current + future assessments to understand the gaps for all nine functions. [For more on this see the Retention Assessment page and how we use current and future state assessments to master retention]

Here’s how customer count informs best practices for retention.

Can you succeed doing something other than these best practices? Of course. Those I spoke to who went in different directions simply had a very clear reason why. For example, a customized CRM SaaS provider maintained named account ownership well into the 10,000+ customer range because it was integral to the acquisition sales pitch and the product complexity led to many questions in the first 90 days.

Client Question: Should we build for where we are today with our customer count of where we’re going to be in 2 years? Answer: Build for the nearer future. But acknowledge the longer horizon by not putting barriers in place now that hinder future changes. For example, don't over-hire generalists when you know your future hiring profile is specialists. Same with team locations, etc.

Perceived Spend Outweighs Actual Spend

I said at the beginning you’re probably not as right as you deserve to be. Our reliance on customer spend tends to be directionally correct but needs refinement.

Mastering retention requires us to provide the right experience to customers based on their attributes and preferences. What a customer spends is neither a customer attribute nor a preference. It’s a function of your transaction and your business. It’s important, sure, especially for identifying risk in a smaller customer pool, forecasting revenue, etc. But for the most part, customers themselves don’t care about their size and their size alone is not worthy of segmentation. When we try to boost retention using customer spend (or ARR or MRR or ACV or LTV or pLTV or XYZPDQ) we’re using our own business details, not customer attributes.

It’s time to move to the Platinum Rule - Treat others as they wish to be treated. This creates the proper focus on customer attributes and preferences. As a result, customer spend transforms into “perceived spend”. What is the customers’ perception of their spend?

The Platinum Rule of Retention: Treat Customers the way they wish to be treated.

This potentially transforms how you deliver success and retention. It places the focus properly on the customer and increases our ability to apply the right retention strategy. Customers who perceive their spend as quite high carry different expectations than those who perceive their spend as quite low. This data isn’t as easy to capture as actual spend but it’s also far more valuable because it improves both customer experience and operating efficiency.

Defining perceived spend need not be overly complex. I’ve used both indirect and direct options depending on the industry and customer interaction types.

  • Indirect Measurement - understand investment in your product as a proportion of total spend or total value. Examples include spend / overall customer revenue, spend / department budget, spend / total spend for SaaS, and spend / total tech spend.

  • Direct Measurement - understand the investment from the literal voice of the customer. This is an excellent way to bridge from Sales to Success and to build deeper value propositions. Ask the customer how important your product is and how it fits as an investment. You don’t need a perfect scale for this. A simple High/Low/Other suffices to create meaningful and actionable segmentation for retention.

You applied the Platinum Rule for Customer Retention. You understand spend from your customers’ POV. Now what?

These best practices are likely similar to your existing strategy if you segment by customer spend or serve predominantly one perceived spend category. The difference is using the customer POV to define your path. Again, you can deviate from these best practices. Just be sure you know why.

Client Question: What about customers with low spend who perceive it to be very high?
Answer: It still goes back to expectations. You have two choices--deliver on that expectation or help reset it. If you choose to meet their expectation aim for personalization at scale through automation or other means. If you choose to reset the expectation, do so at a natural discussion point such as the renewal so the customer has a chance to accept or not accept the new normal.

Do This Right Now

I threw a kitchen sink of content your way. But it covers myriad possibilities. Here’s a way to pull out the nuggets you need to better match your retention strategy to your customers.

  1. Run a Start/Stop/Continue (SSC) Exercise. Identify areas where you diverge from the best practices above and don’t have a great reason why. Then write a list of current retention activities and decide if you should Stop or Continue each one. Then make a list of activities to Start that will create better alignment. This is your draft roadmap for change.

  2. Compare Today and Tomorrow. Think ahead a year or three. Does this change your self-assessment of your customer count or perceived spend? If so, use the tables above to identify current practices to change or new ones to begin.

  3. Leverage the Next Conversation. Use your next conversation with each customer to migrate to new models, tasks, or expectations. It’s a natural time to share a new CSM assignment, change in service, or better understand their POV on spend.

  4. Do Nothing. Seriously. Just be aware of the potential challenges of your retention setup and prepare to take action later when urgency and impact come together.

Wrapping Up

Customers are one of three areas--along with Product and Team Expectations--that should inform your success and retention strategy. The overview article is here and deep dives into the remaining areas will follow.

If you want a more nuanced look at mastering retention for your specific situation check out the Retention Factors survey instrument and complimentary assessment

Finally, share your story. Drop a comment below or reach out to me directly and share how you’re using intel about your customers to improve retention. I’m confident that customer count and perceived spend matter but I offer them as a strong starting point, not the final word!

#customerretention #cx #customersuccess #retentionstrategy

Related Reading: See ALL 9 FACTORS that influence retention strategy See how your PRODUCT influences your retention strategy (coming soon!) See how your TEAM EXPECTATIONS influence your retention strategy (coming soon!)

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