11 Customer Retention Strategies That Translate Into Lifetime Value

11 Customer Retention Strategies That Translate Into Lifetime Value

Last updated on by in Marketing Agency Tips

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MBNA President Charles Cawley had seen enough.

After spending an entire morning reading customer complaint letters, he frustratedly assembled his staff of 300 to make a pivotal announcement. From now on, he told his employees, his bank’s focus would be on customer satisfaction over acquisition.

Eight years later, that mindset had led to a defection rate 50% lower than the industry average. Only 5% of MBNA’s customers left each year.

While at first glance that metric may not seem like an important one, a closer look at the company’s bottom line suggested otherwise. Profit was 16x higher than it was nearly a decade earlier, and the bank’s industry ranking rose from 38 to 4.

Soon after, more and more service providers began following his lead. Other banks, contractors, and agencies, started shifting their focus to customer retention.

The importance of customer retention strategies

How much does your average client spend throughout their relationship with your agency? Do you know?

If not, it’s time you found out. The formal term for this concept is “customer lifetime value,” and its importance was studied thoroughly by Frederick F. Reichheld and W. Earl Sasser Jr. nearly three decades ago.

The biggest takeaway from the research, published in the 1990 issue of the Harvard Business Review, can be summarized by an introductory paragraph:

Customer defections have a surprisingly powerful impact on the bottom line. They can have more to do with a service company’s profits than scale, market share, unit costs, and many other factors usually associated with competitive advantage. As a customer’s relationship with the company lengthens, profits rise. And not just a little. Companies can boost profits by almost 100% by retaining just 5% more of their customers.

How does that make sense?

Well, the study’s authors found that the more satisfied a customer was with a service provider…

Let’s use a marketing example.

You’re a full-service marketing agency that’s been contracted to execute a content marketing strategy for a business. If that content is generating ROI for your client, that client is not only going to continue to do business with you, but they’re also more likely to consider spending on more content, or another one of your services, like search engine optimization. They’re also more likely to refer new business to you.

Reichheld and Sasser found that to be true across all industries they studied. The longer a customer stayed with a company, the more they contributed to its bottom line — all the way through the 19th year of the relationship.

So how can you maximize the value of your best clients by keeping them coming back for more?

We got some insight from 85SIXTY’s Steven Price, who counts brands like Philips, JVC, and Asics, among his marketing agency’s clients.

1. Show them that they have a problem

Here’s a technique we think is pretty genius. And it’s something master storyteller James Young (who jumpstarted the deodorant industry with a series of ads) would’ve loved, too.

At the beginning of a contract term, most agencies gather data relevant to the project they’ll be working on. If the job is paid search engine marketing, that data could be related to keywords, PPC click-through rates, AdWords Quality Score, etc.

When 85SIXTY begins working with a new client, though, they do it a little differently:

One thing that differentiates us is our approach to organizing our client's data no matter what channels we are executing. We generally build a data warehouse that aggregates information from a broad number of often siloed channels - media, website, ERP, POS, CRM, etc. - so that we can better understand the impact of our efforts across the true KPI's of the business. That allows us to provide better insights back to the clients and allows them to start asking questions that they previously may not have been in a position to answer. This data set often becomes the conduit for additional projects.

That last sentence should be the one that catches your eye. Steve and his team use data warehouses as a “conduit” to extend customer relationships. By showing his clients how their KPIs are connected, he’s able to identify gaps and offer to fill them with more of the agency’s services.

In other words, using data he shows them that they have a problem. Then, he offers to fix it.

2. Don’t be afraid to start small

Many times when clients seek help from agencies, it’s a specific task they need to be accomplished. Maybe they need a website built or a content marketing strategy developed. Whatever it is, the first step to building a prosperous relationship is getting your foot in the door.

While agreeing to a long-term retainer is in your best interest, your potential client may not be fully on board. If what they’re looking for is help with a particular project, don’t turn them down strictly because the conditions aren’t ideal.

Consider it a paid trial, and show them you’re capable of working vigilantly to deliver quality end results. If you establish that rapport, Steve says, it’s quite possible the relationship grows into something longer-term and more profitable for you.

We want to have long-term relationships that grow over time. It's just more effective for everyone that way. We will sometimes start working with a client on a single tactical area - like paid social for example - and then that will expand into other areas - other paid channels, organic social, email, CRO - as they get a feel for our approach and our expertise.”

Sometimes, no matter who you’ve worked with or how many awards you’ve won, a client will be hesitant to sign the dotted line of a longer contract. Don’t be afraid to start small and prove your expertise, then upsell or cross-sell to extend the relationship. When that trust develops is when you’ll see the biggest profit for your agency.

3. Define “success,” and prove that you’re achieving it

According to AMI’s Hiring and Firing Insights Report, 46% of clients who fired an agency did so because they didn’t achieve the desired result. But “desired result” can mean a lot of things if it’s not defined initially.

“We need someone to generate leads with our Facebook page” isn’t specific enough of an outcome to agree on. How many leads? What kind of lead? How do you define “lead”? Is generating more leads even going to help the business’s bottom line?

Make sure that you’ve settled on a definition of “desired result” before you begin your contract to make it easy to prove that you’re generating ROI for your client. That definition should be something top-of-funnel relevant to the job, instead of bottom-funnel that you’re not directly responsible for. And, as Steve says, it should also be “tailored to each client and in-line with their own success metrics.”

The industry’s top agencies measure their performance with marketing stacks that feature these 17 types of software. Assemble your own to prove your effectiveness.

4. Consider your clients an extension of your own business

When your client succeeds, you succeed. It’s for this reason that instead of considering his client's customers, Steve and the team at 85SIXTY think of them as partners, or even team members:

I personally am looking at every single client on a weekly basis and then driving our internal teams. I see each of those clients as though it is my own business — after all, our interests are truly aligned in our collaborative model - and I treat them as such.

If you look at your client's business as an extension of your own, then you’re more heavily invested in the outcome of your work. Their PPC conversion rate is your PPC conversion rate. Their leads are your leads.

Not to mention, it’ll make your client feel less like a customer and more like a partner. And they’re more likely to work with a partner long-term than a marketing agency that’s only in it for the revenue.

5. Try giving them more access

Client communication is usually handled by someone in account management. If they have an issue that requires addressing by the team that’s handling their work, the account manager serves as a middleman.

However, at least in 85SIXTY’s case, a highly integrated non-traditional model has proven to be “key in achieving client satisfaction:”

Clients tend to then see us as an outsourced in-house digital team. We think that this in itself helps reduce churn because we are so highly integrated into the client's business. We also have direct access between clients and the individual members of our team - many of whom are very senior.

The idea of giving your clients access to individual team members may sound scary. But if they’re veterans of the industry, they’ll know which issues they can address themselves and which require organizational attention.

If you trust your staff to handle a direct line to your clients, and you trust your clients not to abuse it, this method of integration might be something to explore.

6. Offer incentives

If you have the ability to offer your clients some incentive for sticking with you for the long haul, do it. It could be something as simple as giving them a 2% discount for paying their invoice early, or a month-long trial of a bonus service like landing page creation.

That way, you’re rewarding them in a way that actually rewards you. When they pay their invoice early, it’s easier to maintain cash flow. When they trial a free service for a month, they’ll see how valuable it is to their business and possibly choose to invest in it later.

These mutually beneficial rewards work to make both parties happy in the long run.

7. Pay your clients more attention

Every agency employee thinks they’re great at multitasking, and every agency employee is wrong. Studies have shown that our brains aren’t actually wired to do two things at once, and those extra hours spent juggling countless tasks are hindering your productivity more than helping it.

Use industry-leading tools to boost your efficiency. Try some agency productivity hacks that involve eating a live frog (yes, that’s a metaphor) and holding stand-up meetings.

According to AMI’s report, the second most common reason agencies are fired is because they can’t give a client the amount of attention they expect. The smarter you work, the more time you have for them, and the less likely they are to leave you for someone more attentive.

8. Treat your clients like people

The reason the words “you” and “exclusive” are so powerful in copywriting is the same reason people love personalization in marketing: Because everyone wants to feel special.

Your clients are people too, don’t forget. They like to be reminded that they’re not just another logo on the “clients” page of your website, paying to keep your lights on.

So, every once in awhile, it’s a good idea to show your appreciation. A fascinating little experiment involving waitresses and after-dinner candies exposes how: Try sending a small token at an unexpected time.

In the study, patrons left tips 23% higher when a waitress dropped off an after-dinner candy, then returned a minute later to allow them to pick another for being “such a great table.”

Even something as simple as a personalized gift basket can make a client feel like more than just a source of revenue. Think of it as an investment in your relationship.

9. Understand who your client is and how to handle them

No two clients are the same. Learning how to identify who’s who, and how you should handle them, is crucial to building a long-lasting relationship.

For example, the “Flake” will be easy for you to land as a client and relatively low-maintenance. On the other hand, the “Control Freak” will often make unrealistic demands of you and your team, to the point you may wonder if retaining them isn’t even worth it.

To find out how to deal with 10 different types of common clients, check out this blog post.

10. Admit your mistakes

Treat every mistake with a client as though it were made publicly, and remedy it like you would accidentally starting a hashtag controversy on Twitter. Apologize sincerely to your client and admit you can do better. “It’s not our fault” is a phrase that should be removed from your communications with any customer.

If you do lose business and you’re unsure of why, ask. Learning from your lost clients will ensure you don’t make the same relationship-ruining mistakes twice.

11. Keep your cool when they aggravate you

Some clients know they’re a pain but don’t care, while others are completely oblivious to it. If they’re the type to routinely deliver bad feedback, don’t react with an angry impulsive message you’ll regret later. That’s a technique we call “How To Lose A Client In One Email.”

Instead, take some time to cool off, then learn how to translate that unhelpful feedback into something more valuable to you and your team. Unfortunately, while you’ll be expected to apologize for every little mistake you make, the same can’t be expected of your clients.

If you’re still hot-headed after a little breather, read a few submissions to Clients From Hell. Soon you’ll realize that it could be worse.

Which client retention strategies do you find most effective?

How do you retain clients? What did we miss here?

Let us know in the comments, then begin generating new clients and offering them new services with the help of the web’s most customizable landing page platform.

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