90% of startups fail. And there are many reasons why. They run out of money, they use the wrong marketing channels, or they fail to find new customers - these are the obvious factors.
Most people think that if you want to build a successful business, you need to get as many customers as possible. But this is not true. In fact, there is one reason that crushes most startups. And most people miss it - these startups fail because they cannot keep their customers - they cannot retain them.
In this article, you will learn why customer retention makes the difference between you having a successful business and closing it down, and 5 game-changing tips that you can use to improve your customer retention rate right now.
Let's dive right in!
Most people think that if you want to build a successful business, you need to get as many customers as possible. But this is not true. In fact, there is one reason that crushes most startups. And most people miss it - these startups fail because they cannot keep their customers - they cannot retain them.
In this article, you will learn why customer retention makes the difference between you having a successful business and closing it down, and 5 game-changing tips that you can use to improve your customer retention rate right now.
Let's dive right in!
What is customer retention?
Customer retention means that customers use your service regularly and stay subscribed. At its core, customer retention is about nurturing and maintaining relationships with your existing customers over time. It's about providing ongoing value so that people don't leave your service.
If you cannot deliver value on an ongoing basis, people will eventually churn, which will ultimately destroy your business. Customer retention is one of the most important metrics for SaaS businesses in particular, because they rely on recurring payments.
Let me show you the reason why.
If you cannot deliver value on an ongoing basis, people will eventually churn, which will ultimately destroy your business. Customer retention is one of the most important metrics for SaaS businesses in particular, because they rely on recurring payments.
Let me show you the reason why.
Why is customer retention so important?
To show you why customer retention is such a critical metric in your business, let me use this metaphor because I think it's great to illustrate the point.
Imagine this: This is your business, this bucket.
Imagine this: This is your business, this bucket.
Now, at the top, you pour in some water, your customers. If you have small holes in it, the water will run out - slowly but steadily.
But if you have big holes, the bucket will be empty before you can add any more water.
On the other hand, if you have no holes, the water will get more and more.
I like this metaphor because it illustrates the importance of customer retention.
The key point is this:
Real growth comes from customer retention, not customer acquisition. Getting new customers on a regular basis is great, but if you cannot keep them, your business will not grow. It is as if you are constantly trying to stay alive with new marketing tactics to get every customer, but again, this is not sustainable. Only if you can retain your customers will you see real growth.
And this is especially true for SaaS companies because customers pay them on a monthly or annual basis. Take Netflix for example. You pay them, say, €10 a month. The longer you stay with them, the more money they make. So their number one goal is to keep you as long as possible.
But there is a second reason why most SaaS companies focus on getting the retention part right. The reason is simple: It is much more expensive to acquire new customers than it is to retain existing ones. Just think about it. If you want to get a new customer, you have to do marketing, you have to spend money on advertising, you may have to make a sales call - it takes time and there is a lot to do.
But if someone is already your customer, all you really need to do is add value. And most of the time that is something you want to do anyway because you are constantly improving your service. So retention is one of the most important phases in your entire growth funnel. Don't underestimate it.
Before we look at the 6 pro tips to improve customer retention - here is the key takeaway I want you to know:
If you can't deliver value on an ongoing basis, people will eventually churn – they will leave your business. Simple as that. So, your goal is to constantly improve your service and show people the benefits they are getting. If you have that mindset, you are on the right track.
Resources to build a successful businessI like this metaphor because it illustrates the importance of customer retention.
The key point is this:
Real growth comes from customer retention, not customer acquisition. Getting new customers on a regular basis is great, but if you cannot keep them, your business will not grow. It is as if you are constantly trying to stay alive with new marketing tactics to get every customer, but again, this is not sustainable. Only if you can retain your customers will you see real growth.
And this is especially true for SaaS companies because customers pay them on a monthly or annual basis. Take Netflix for example. You pay them, say, €10 a month. The longer you stay with them, the more money they make. So their number one goal is to keep you as long as possible.
But there is a second reason why most SaaS companies focus on getting the retention part right. The reason is simple: It is much more expensive to acquire new customers than it is to retain existing ones. Just think about it. If you want to get a new customer, you have to do marketing, you have to spend money on advertising, you may have to make a sales call - it takes time and there is a lot to do.
But if someone is already your customer, all you really need to do is add value. And most of the time that is something you want to do anyway because you are constantly improving your service. So retention is one of the most important phases in your entire growth funnel. Don't underestimate it.
Before we look at the 6 pro tips to improve customer retention - here is the key takeaway I want you to know:
If you can't deliver value on an ongoing basis, people will eventually churn – they will leave your business. Simple as that. So, your goal is to constantly improve your service and show people the benefits they are getting. If you have that mindset, you are on the right track.
6 Pro tips to improve your customer retention
Improving customer retention is something you should always strive for. So use these 6 tips to get maximum results.
1. Manage customer expectations
Our products will help you increase sales, expand into new markets, become more effective, live a healthier life...
Have you ever heard of anything like that? I would love a product like that, but I don't know about you, I haven't found one yet – I just found one that promises things like that. In a nutshell, tell potential customers what you do, what value you add and - if necessary - what you don't do.
You need to be very clear in your communication, wherever it is - on your website, on social media - wherever you have a customer touch point. I never really understood why you should ever overpromise - I mean, if you overpromise, customers will find out immediately and they will churn - they will stop doing business with you - forever. Because the relationship is damaged.
On the other hand, customers who know exactly what they're signing up for are more likely to stick around, even if there are a few bumps along the way. So remember, it's not about overpromising to win customers. It's about matching your customers' expectations with what your business can actually deliver. That way you lay the foundations for a healthy relationship.
Speaking of customer expectations, another thing I like to do is make it clear to customers what you are not going to deliver. You can do this in an FAQ section on your website for example, or make it clear in your sales call.
This builds additional trust.
Have you ever heard of anything like that? I would love a product like that, but I don't know about you, I haven't found one yet – I just found one that promises things like that. In a nutshell, tell potential customers what you do, what value you add and - if necessary - what you don't do.
You need to be very clear in your communication, wherever it is - on your website, on social media - wherever you have a customer touch point. I never really understood why you should ever overpromise - I mean, if you overpromise, customers will find out immediately and they will churn - they will stop doing business with you - forever. Because the relationship is damaged.
On the other hand, customers who know exactly what they're signing up for are more likely to stick around, even if there are a few bumps along the way. So remember, it's not about overpromising to win customers. It's about matching your customers' expectations with what your business can actually deliver. That way you lay the foundations for a healthy relationship.
Speaking of customer expectations, another thing I like to do is make it clear to customers what you are not going to deliver. You can do this in an FAQ section on your website for example, or make it clear in your sales call.
This builds additional trust.
2. Get customers to the AHA Moment quickly
The AHA Moment is that magical moment when a customer experiences the full value or potential of your product. It's the moment when customers say, "This is exactly what I needed!"
But this moment doesn't happen by accident. You have to plan it carefully - because timing is everything. Too early and customers may feel overwhelmed. Too late and they may lose interest.
But remember: The longer the time to value, the more likely people are to churn. We won't go into the details of this concept - here's a detailed guide to the AHA Moment - check it out - but for now, just remember that getting people to the AHA Moment is probably the most important part of retaining your customers.
If customers don't see the value of your service, they will leave. But if they see the benefits, they will stay. An excellent way to get people to the AHA Moment is through onboarding - for example, you could use interactive tutorials, walk-through videos or tooltips - whatever it is, make sure the user journey is clear and that customers see the value immediately - at best, the first time they use your service.
But this moment doesn't happen by accident. You have to plan it carefully - because timing is everything. Too early and customers may feel overwhelmed. Too late and they may lose interest.
But remember: The longer the time to value, the more likely people are to churn. We won't go into the details of this concept - here's a detailed guide to the AHA Moment - check it out - but for now, just remember that getting people to the AHA Moment is probably the most important part of retaining your customers.
If customers don't see the value of your service, they will leave. But if they see the benefits, they will stay. An excellent way to get people to the AHA Moment is through onboarding - for example, you could use interactive tutorials, walk-through videos or tooltips - whatever it is, make sure the user journey is clear and that customers see the value immediately - at best, the first time they use your service.
Resources to build a successful business3. Use upsells and cross-sells
Using upsells and cross-sells is one of my favorite topics – because it creates a win-win situation. Upselling means encouraging existing customers to upgrade their current subscription plan, for example by offering additional features, advanced functionality or higher level plans that meet their needs.
Super simple example - let's say Netflix offers you a plan that allows you to watch 10 movies a month for €1 and another plan that allows you to watch 50 movies a month for €3. If they encourage you to upgrade to the higher plan – that would be upselling.
Super simple example - let's say Netflix offers you a plan that allows you to watch 10 movies a month for €1 and another plan that allows you to watch 50 movies a month for €3. If they encourage you to upgrade to the higher plan – that would be upselling.
But the main objective is not just to increase revenue, it is also to maximize customer satisfaction by providing a tailored solution. In the long run, this will help you build stronger customer relationships and improve the user experience, which will help you keep those customers longer.
Okay, so this is upselling.
Cross-selling is when you recommend additional products or services to your customers. Think of the amazons people also buy box. That is cross-selling. You put something in your cart and you get more suggestions of what you could buy. So when you cross-sell, you are showing your customers complementary solutions that should improve their overall experience.
The great thing about upselling and cross-selling is that - yes, it immediately improves your revenue - because customers invest more in your business, but at the same time those customers are happier because they have found more products that are valuable to them, or another plan that is more valuable to them. So you can also increase customer satisfaction. And in the end, those customers will stay with you longer.
But, and this is important to me: Always show customers additional, relevant offers. Never sell something that has no value to the customer just to increase revenue. If you do that, you will damage your relationship with the customer. So always make sure what you offer is valuable.
If customers feel that your upsells really enhance their experience and are aligned with their goals, they're more likely to see each upsell as an opportunity rather than a sales pitch.
Okay, so this is upselling.
Cross-selling is when you recommend additional products or services to your customers. Think of the amazons people also buy box. That is cross-selling. You put something in your cart and you get more suggestions of what you could buy. So when you cross-sell, you are showing your customers complementary solutions that should improve their overall experience.
The great thing about upselling and cross-selling is that - yes, it immediately improves your revenue - because customers invest more in your business, but at the same time those customers are happier because they have found more products that are valuable to them, or another plan that is more valuable to them. So you can also increase customer satisfaction. And in the end, those customers will stay with you longer.
But, and this is important to me: Always show customers additional, relevant offers. Never sell something that has no value to the customer just to increase revenue. If you do that, you will damage your relationship with the customer. So always make sure what you offer is valuable.
If customers feel that your upsells really enhance their experience and are aligned with their goals, they're more likely to see each upsell as an opportunity rather than a sales pitch.
4. Create a communication plan
A communications plan with your customers is like an ongoing dialogue that keeps the connection alive long after the initial transaction. It's about being a 'friend', always there to listen and support them on their journey.
The key is this - you need to change your mindset from short-term profit to long-term customer value. Away from one-off transactions - to long-term customer relationships where customers come back to your business and, if they find more value, are happy to buy your products.
So communicating with customers is key to staying connected and relevant. And that is where a communications plan comes in. But such a plan isn't just about updates, it's about nurturing relationships.
For example, if you offer software and Alice - your first customer - has just subscribed, you could create a communication plan like this:
The key is this - you need to change your mindset from short-term profit to long-term customer value. Away from one-off transactions - to long-term customer relationships where customers come back to your business and, if they find more value, are happy to buy your products.
So communicating with customers is key to staying connected and relevant. And that is where a communications plan comes in. But such a plan isn't just about updates, it's about nurturing relationships.
For example, if you offer software and Alice - your first customer - has just subscribed, you could create a communication plan like this:
You send Alice a welcome email when she registers for your product. This sets the tone for a positive relationship.
Next, check in with Alice regularly to make sure her needs are being met and her expectations exceeded. This is particularly important if you see that she is about to churn or is not using your software as much as you would like - so you want to demonstrate your value on a regular basis.
The next part could be sharing content with Alice that adds value to her experience - tips, how-tos, industry insights and success stories, whatever it is, make it valuable.
Here and now you can celebrate milestones with Alice - whether it's her anniversary with your brand or a special event in her business journey. The important thing here is not to spam. If you start spamming and have special occasions all the time, Alice will unsubscribe or send your emails straight to spam.
And of course - and this is something you should always do - encourage Alice to share her thoughts, suggestions and concerns. Getting customer feedback should always be part of your communication plan.
Next, check in with Alice regularly to make sure her needs are being met and her expectations exceeded. This is particularly important if you see that she is about to churn or is not using your software as much as you would like - so you want to demonstrate your value on a regular basis.
The next part could be sharing content with Alice that adds value to her experience - tips, how-tos, industry insights and success stories, whatever it is, make it valuable.
Here and now you can celebrate milestones with Alice - whether it's her anniversary with your brand or a special event in her business journey. The important thing here is not to spam. If you start spamming and have special occasions all the time, Alice will unsubscribe or send your emails straight to spam.
And of course - and this is something you should always do - encourage Alice to share her thoughts, suggestions and concerns. Getting customer feedback should always be part of your communication plan.
5. Rewards programs
Reward programs are an excellent way to keep your customers in your business. Let me tell you a personal story.
A few years ago, I had an internet provider that was always giving discounts to new customers. Like 50% off the first year for new customers, 30% off this, 30% off that, and so on. I had been a customer for many years, but I never got any discounts. That is not what I call a great customer experience. From a business point of view, I understand the strategy. The guys just wanted to get more and more customers. But guess what happened to some long-term customers - like me. I switched providers.
And I think that shows very well why you should reward your long-term customers. You want to reward your best customers for their loyalty. Your loyal long-term customers are your heroes. So treat them like it.
You can do this by offering discounts on long-term subscriptions, for example, or you can work with a points-based system, which means that every time they sign up or log in, they earn points that can be redeemed for additional features and add-ons. This also keeps customers engaged.
A few years ago, I had an internet provider that was always giving discounts to new customers. Like 50% off the first year for new customers, 30% off this, 30% off that, and so on. I had been a customer for many years, but I never got any discounts. That is not what I call a great customer experience. From a business point of view, I understand the strategy. The guys just wanted to get more and more customers. But guess what happened to some long-term customers - like me. I switched providers.
And I think that shows very well why you should reward your long-term customers. You want to reward your best customers for their loyalty. Your loyal long-term customers are your heroes. So treat them like it.
You can do this by offering discounts on long-term subscriptions, for example, or you can work with a points-based system, which means that every time they sign up or log in, they earn points that can be redeemed for additional features and add-ons. This also keeps customers engaged.
6. Collect and act on customer feedback
Now for the final tip - get customer feedback and, most importantly, act on valuable feedback. Customer feedback isn't just a collection of opinions; every piece of feedback helps you build a better product or service.
And the benefits are clear: you can build a better product, and you show the customers who gave you feedback that you value their opinions and take them seriously. This will turn your customers into raving fans who will be happy to give you more and more feedback.
They will feel part of your community. And having a community is great.
And the benefits are clear: you can build a better product, and you show the customers who gave you feedback that you value their opinions and take them seriously. This will turn your customers into raving fans who will be happy to give you more and more feedback.
They will feel part of your community. And having a community is great.
Wrap-up & what's next
Customer retention is what makes or breaks your business. Your goal is simply to keep as many customers as possible. With the 6 tips I've given you, you're already on the right track - but don't feel overwhelmed - you don't have to do everything today. Take it one step at a time, see what works and go from there.
Customer retention is just one part of building a successful business. If you are looking for a step-by-step system to help you build the business of your dreams, the Startup Success Bundle is for you.
The Startup Success Bundle helps you turn your startup vision into the successful, thriving business of your dreams. From finding your idea and developing your product, to building a happy customer base and achieving sustainable revenue.
Check it out!
Customer retention is just one part of building a successful business. If you are looking for a step-by-step system to help you build the business of your dreams, the Startup Success Bundle is for you.
The Startup Success Bundle helps you turn your startup vision into the successful, thriving business of your dreams. From finding your idea and developing your product, to building a happy customer base and achieving sustainable revenue.
Check it out!
