Customer Retention Strategies for Startups
One of the biggest problems that founders and startups face is customer retention.
You lose users because you either did not do certain things that you ought to do, or you just don't know.
We had a Twitter Spaces conversation that covered strategies to ensure that you're not just acquiring your customers, but you are also retaining and ensuring that your customers are loyal.
Meet The Speakers
About Natalie Gullatt
Natalie works at HubSpot, a business-to-business SaaS company that focuses on customer relationship management. She works on the customer marketing and customer advocacy program, focusing on retention marketing.
Outside of her 9 to 5, she is the president and founder of the Black Marketers Association of America (BMAA).
BMAA is an organization that helps marketers of color with having fulfilling careers through full-time marketing job, through owning marketing agencies and businesses, and a safe space for persons wanting to learn more about marketing and marketing enthusiasts. She is happy to join this conversation.
About Opeyemi Obembe
Opeyemi is the founder and CEO of Engage, a solution that helps businesses with better customer messaging. When Opeyemi used to work for a startup, one of the biggest struggles he had was with customer messaging.
It was a hassle trying to communicate with certain groups of customers. Every time, they needed to get a list of people in a particular location or plan they needed to go through the engineers.
By the time they wanted to communicate with that segment of the audience again, they'll need to go back to the engineers because a lot of things may have changed about the segment.
It was this tedious process and need that he recognized that inspired the building of a customer messaging solution.
Opeyemi is delighted to share his experience and expertise with us.
About Tricia Olufemi-Olumide
Tricia is the Lead Strategist of TriciaBiz and is recognized as one of Nigeria’s most impactful marketing strategists, business and entrepreneurial coach, and expert in revenue and performance enhancement and acceleration.
Since she founded TriciaBiz, Tricia has significantly guided over 130,000 small and medium scale businesses in increasing the bottom lines in various industries worldwide and taught her clients how to effectively define their brands, develop custom-tailored marketing and sales strategies to grow into sustainable businesses.
Tricia the 'Business Fixer" puts her genius to work helping high-performing individuals start a business or grow existing businesses into profitable and sustainable brands.
Highlights of the conversation
Importance of Customer Retention
Why is it important to retain the customers that you have? What makes focusing on customer retention important?
To grow your business you have to retain revenue - Natalie Gullatt
Let's say your business is worth $1m in 2021, and if your goal is to grow the valuation to $2m. That means you have to maintain the current customers at $1m, and then add another $1m to continue to grow.
So, assuming your company or your business has more than one product, and there's a base level product and an add-on for that product in order to grow your business. If you maintain a customer and you upsell that customer, that is additional revenue, so you can grow your business closer to that $2m goal.
Customer retention is very important and a lot of businesses don't do it until they have grown to a certain size or a certain space. I think it's very important to remember that if you start those habits now and you become a customer-centric business, it makes it easier for you to then get more prospects - Natalie Gullatt
When you treat your customers well, they know that not only are they going to get great products but also a great experience that keeps them coming back.
The cost of getting back a lost customer is way more than the cost of getting a new customer - Uwem Uwemakpan
It involves knowing your customers, understanding their preferences, and gaining their trust.
Data Collection for Customer Retention
So what kind of data should you collect as a startup looking to improve customer retention?
From a B2B standpoint, if you are in tech, for example, one place you should be looking at is the user data.
How much time are users spending on your product?
There is a known fact, I guess, that the more time your customer spends on your product, most times, in most cases, that means they're engaged with your product. It's kind of like social media. The more engaged your followers are with your accounts, that means the more that they're invested- Natalie Gullatt
From a B2C standpoint, you want to check - how many customers walk into your store? how many of them buy when they come in?
Connect these things to the campaign or activities that are going on at that time. What did you do to get the result?
Another data you should also look into is feedback.
So from a B2B and from a tech space standpoint, we have something called our Customer Advisory Board. Not everyone is allowed to be on it, so it's an elite group of our top people and we ask for feedback. We say, well, what do you want to see out of the product? How can we improve and what to go forward with in terms of the next pieces of our products - Natalie Gullatt.
Working with an advisory board will help you stay ahead of your competitors, it'll help you know where your research and development team should invest their time, and most of all, make your customers happy.
Tracking data helps you know what your users want based on their prior actions in the event of situations like a pandemic or economic recession.
Asking users what they want is also super important - Natalie Gullatt
You need to know what makes your customers say "Yes! This is the product I am looking for"' to be able to retain them.
One of the first things you want to do is to map out your customer journey, right? Try to understand the part that's an aha moment in your product. - Opeyemi Obembe
When you find this value discovery point, you can now look at the product holistically and try to identify;
The frictions on the way to getting to that value point
How you can improve the process
How you can guide the customers seamlessly to that point
These are the first things you should be looking at.
Handling Negative Feedback
Negative feedback will definitely come even though nobody enjoys it.
But how do you handle or manage it as a startup?
Handling feedback starts with creating a channel to receive it.
It needs to 1st be wired into the customer service process of the organization, because many times we don't even have the channel to receive the feedback. - Tricia Olufemi-Olumide
So you should create a feedback channel, whether by email, SMS, or through phone calls where people can actually leave honest feedback.
After which you can now see how to handle it.
The average small business owners that we come across online have different coping mechanisms, so some will post it on social media and say “see what somebody said. yes, I can't believe it”. I think that in situations like that, calling out your customer doesn't work. - Tricia Olufemi-Olumide
If a customer says your service isn’t pleasant, then it isn't pleasant.
We all have different levels of exposure and my idea of excellent services might be different from what you consider excellent. - Tricia Olufemi-Olumide
The first thing you need to do is to take the feedback first. Accept it.
Think about what to make out of it. Does compensation need to happen? Do you need to apologize? Is there a breach in your process that needs to be fixed? What do you need to fix internally to make sure it doesn't repeat itself?
As a business, you need to be very open-minded and try to understand that from the customer's perspective, those feedbacks are not coming from a place of hate, but from frustration - Opeyemi Obembe
Customer frustrations can be due to poor customer education on your part or maybe something doesn’t work the way the customer expects.
It’s important that as a startup, you embrace those moments and think of them as an opportunity to refine your product.
Negative feedback will surely come but embrace it and look at it as an opportunity to refine your product, get better, and just ensure that things work. - Opeyemi Obembe
The second is to ensure that your customer is eventually happy and gets off their anger.
Understand where your customer is coming from and try to work towards a resolution.
For instance, we had an event earlier at some place and the service was such a disaster that all 22 of us vowed never ever to return there. If we're not returning there, there's like 10 people not returning there with me and with the other 21 people, at the end of the day there’s like 200 people never returning there and it's just going to cascade down. - Tricia Olufemi-Olumide
Try to ensure that your customer doesn’t leave upset.
Do not superimpose your opinions. What might seem nice to you, might not be nice to someone else.
Your opinion is not the ultimate, somebody else out there has an opinion that also should be listened to and attended to - Tricia Olufemi-Olumide
Startups can educate their customers such that the customers then develop an affinity for the product and how to use it optimally.
But how can you achieve this?
One, content is King, so I would say make sure your marketing team is including that in their content strategy. So yes you want to have some blogs, you want to have some white papers or ebooks or whatever you want to do, but make sure you're also teaching people and becoming that thought leadership - Natalie Gullatt
If you have your customers in mind, you want to make sure you are educating them. Education is one of the things you should be providing for them.
Work with your Comms or Marketing team to develop a strategy to educate your users.
We spend a lot of time doing webinars and events, and we spend those times really catered towards prospects, but why not cater them to customers even if it's a small goal, one time per quarter, let's do a customer-centric webinar. - Natalie Gullatt
A lot of startups don't do this because they think it has no ROI on it.
What I challenge people to think about is that, you don't see the initial ROI on a demand Gen webinar because sometimes deals take very long to close. So take some time and spend that time educating your customer on something that you've gotten feedback from. - Natalie Gullatt
To achieve this, you need to create a customer journey and know where your customers are so you can communicate with them appropriately.
If you're a small startup, you may want to just start with your comms team and have a small goal. Once a quarter, we have some content that is directed towards our customers 1st and so that way they can at least get some education - Natalie Gullatt
This way you can easily build super users, people who know your product so well that they can educate other customers too.
Startups need to look at their onboarding process from start to finish and see how else can I embed knowledge or use of my product or service. - Tricia Olufemi-Olumide
In the onboarding journey, depending on the industry, let's say a beauty brand, onboarding starts from the labeling giving directions on how to use the product, the ingredients, and all of that.
So you have to ensure that you cover all the touch points that users will have on your product and use all those touch points to explain how to use your products.
A lot of tech companies use how-to videos, explainer videos e.t.c.
So basically sit down, look at your onboarding process and say "How can I educate these guys better?" - Tricia Olufemi-Olumide.
Doing Giveaways for Customer Retention
In a bid to retain attention, a lot of brands use giveaways. It doesn’t always end up well.
I feel like brands that do loads of giveaways. There's something they're trying to either cover or there's something they're trying to achieve, and that's definitely not customer retention. - Tricia Olufemi-Olumide.
The primary goal of customer retention is to get somebody who has patronized your business or your service to come back again. Giveaways don’t help you achieve that.
People coming back to your service is dependent on these major things.
If I paid for a particular service, did I get what I paid for? And even some more?
What was the attitude of the service experts to me?
What was the response frame?
Identify the top five things that customers are looking for in your space or industry. Is it speed? Is it time of response? Is it the quality of products or services? - Tricia Olufemi-Olumide.
Loyalty programs are also a good strategy for locking people in. Some companies give people points for making purchases.
I sign up for loads of points and go half the time cracking jokes like I'm sure I'll be 50 years before I can make good use of these points. Because the points are almost nil like 1 cent per point, before I can buy anything with those points, I'm sure I'll be 50 years old, but I will still keep using it because there's just something it does to my head. Like, oh, I'm just going to get some points for this purchase, even though the points are not cashable anytime soon - Tricia Olufemi-Olumide.
But retention cannot happen with random people online who maybe have to like, comment, or follow you, to get a giveaway.
Another thing to note is that while creating loyalty programs, consider customers that give you volume as much as you consider those that give you value.
Most times we reward customers that give us the highest value, I would like to say that please also look at those who give us volume. - Tricia Olufemi-Olumide
What is the difference?
Let’s say for instance that Davis comes and does a transaction of $10,000 and maybe he is part of the top 10 customers for the year.
However, there is James who has done business with you 10 times this year. However, his transaction is $500 per transaction. If you multiply that by 10, that’s $5000 versus Davis who did a $10000 transaction at once.
Davis gives you the highest value but James gives you volume. James should also be valued as your customer because he has come back 10 times. He is loyal to the brand.
So just look at the proper metrics, reward right, and create a loyalty program that actually targets your main fans, who are the people who come repeatedly even though their value is low. - Tricia Olufemi-Olumide
Structuring Messages for Customers
A major part of customer retention has to do with engaging your customers and messaging plays a major role.
So how do you structure messaging for customers?
Look at the onboarding process to the point of value, you can break it down. Look at places where your customers get stuck and use those points as a way to educate the customer on what's next. - Opeyemi Obembe
For example, let’s say when a customer signs up for your fintech product, they do a KYC process before they do a transfer, what you want to do is that you want to actively see how your customers pass through those processes.
So how many customers get from point A to point B to sign up for the KYC process?
How many customers get from the KYC process to actually perform a transfer right?
Within those points, you are able to have messages that automatically just nudge them to say “hey, we noticed maybe you've signed up for five days and you have not completed your KYC process, is there an issue? Is there something we can help you with? Is that something you're struggling with?”
If you have a knowledge base that addresses that, you can also include that right between the KYC process and maybe the transfer as well.
This means you are automatically engaging them to let them know that if they face any problem at any time, they can reach out to you to get it resolved.
For customers that have passed through that onboarding process, you want to also ensure that they get the best of service. They get the best value from what you're offering - Opeyemi Obembe
A fintech application, for example, ideally the customer should do a transaction in a month or maybe 2 transactions in a month.
You should actively monitor customer transactions to ensure that you know;
Who are your top customers?
Who are the people that are not meeting these goals?
How can I reach out to them?
How can I talk to them?
Something you also want to do is to nudge customers that are inactive. - Opeyemi Obembe
So if you find out that a customer who has been active is no longer active, you want to have a process that automatically engages them.
You can also create a segment where customers that are inactive for a period of time get added, so you can just reach them to find out what is wrong, get some feedback, and engage them.
The channel for communication matters as well, in as much as we want to say, hey, e-mail is king, we want to send emails to all our customers and such. It's important to understand what channels suit your customers the most. - Opeyemi Obembe
For example, if your product is primarily focused on mobile, you may want to go for a push notification or SMS instead of emails.
Where I used to work, interestingly, we found out that over 40% of our customers don't even have a valid e-mail, right? And I mean, when we started out , we were just sending emails to everyone and apparently 40% of those people were not reading them - Opeyemi Obembe
Importance of Community for Customer Retention
People love to have a sense of belonging. There’s always a joke about people not buying Rolex to check time, it’s actually to be part of the people who wear Rolexes. This goes across a couple of brands.
For me, for instance, one of the strategies that I've used to get customers and then to retain them is building a community - Tricia Olufemi-Olumide
You’ll need to let people know who you are, why they should be with you, and what they can get by being associated with you.
So I've been teaching marketing for five years now and I have people who bought everything I ever sold. Everything! A couple of them buy because they're going to meet other people with like minds in the class or in the group or in the mastermind or whatever it is in the program. They know that apart from what Tricia teaches us, there are other people there that I could meet and partner with or just learn from, or just build relationships. - Tricia Olufemi-Olumide
Brands are able to build a buzz around their products that make you feel like if you are not shopping with them, wearing their products, or using their services, then you don’t belong to a certain class.
There are different tools that you could use for retention, but community building is one tool that you can use to just keep people repurchasing from you. - Tricia Olufemi-Olumide
If you look at some tech platforms, for instance, teaching platforms like Kajabi, you see that they are continuously creating solutions, free trainings, conferences, etc., for creators on their platform. The aim is to draw people into their community of creators.
Depending on the industry you fall under, just find what works for you. For me, I'm in the service business. I consult and teach. Community building is just it for me. Tricia Olufemi-Olumide
Another thing is to ensure that you always overdeliver on whatever you promise, this makes it easy for people to recommend you and to attract more people into your community.
I have this slogan where I say every time you enter my class you would always owe me at the end, because what you paid me is not what you get, you get maybe times 200. And because you owe me, you want to repay me by referring me or talking about me. And that's how my community keeps growing. - Tricia Olufemi-Olumide
When engaging customers to achieve retention, you can’t send the same messages to all types of customers. Segmentation is important.
I mean a lot of businesses do this where you know they send this generic one message feature to all customers. It shouldn't be so. - Opeyemi Obembe
You should be able to segment customers based on who they are, what they have done, their preferences etc. This way you will be able to engage each segment how you should.
The kind of message you send to someone that is in quotes, a top customer, someone that's been using your product, or your service for a couple of years will be different from the type of message you send to someone that is just, you know, trying to figure out your product - Opeyemi Obembe
Segmentation helps you put your customers into different buckets based on different parameters.
It could even be based on simple things like gender, location, age group, and maybe even complex things like how many people have done this number of transfers or transactions or how many people have logged in over this period of time or are yet to log in.
You’d be able to see what your distribution looks like across various segments and tailor your messages to meet specific needs.
I’m sure you’d agree with me when I say that this conversation is a masterclass! Tricia, Natalie, and Opeyemi had some final words to wrap up this conversation.
Remember that customer retention doesn't fall on just one department, so you have to collaborate with everyone. If you need to have a dedicated retention team or customer experience team and they need to talk to their marketing team who needs to talk to the sales team and everyone needs to be brought in. Stay motivated and look for communities of customer retention specialists, look for customer marketers, look for customer success managers and learn from them and apply it to your business. Don't reinvent the wheel. - Natalie Gullatt
You should look at customer retention as a very important and big part of your business. One of the easy ways to approach this would be to start with the small things like messaging, for example. How do you put some automated messages in place? To just guide customers on discovering what exactly your product value is. You can start from that, and from there you can iterate bringing in the other elements of the customer retention plan, building the community, getting dedicated personnel and all of that. But again, you can start with the small things right? Segmenting your customers and building just a very simple onboarding flow to engage customers based on what they've done and helping them just discover value in your product. - Opeyemi Obembe
I will say that customer retention actually starts with the quality of your product or service that you're offering. Many times we look at customer retention at the end of the buying journey. Actually, it's at the beginning of the journey, where you ensure that you know what you're putting out is what you actually say it is. That's the first thing. The second thing that I will say is to leverage your customer data. I think somebody already spoke about data earlier, just sitting down with the data. First of all, assume that we are gathering data. I'm sitting with the data to see exactly things like, you know, transaction history, interaction with customer service, churn rates, buying patterns, consumer behaviour, e.t.c So based on the data and the history you have on the customers, you can segment them and then communicate based on the segment or the categorization that they fall under. Also give yourself grace. That's what I'd end with. So yeah, if sometimes it may just get really, really tough and you may just have a really terrible follow up with the customer or something like that, and you're rethinking your entire existence. Give yourself Grace, get back on track, and just keep going. Some days may be better than some, but just keep going - Tricia Olufemi-Olumide
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