The perils of leaving customer engagement and retention to chance
After onboarding, SaaS customers usually have to navigate their own way to success—with maybe a few customer success manager (CSM) calls if they’re a large enough account to warrant having one, and a knowledge base to get them there. It’s like the scene in Lord Of The Rings where Gandalf gives Frodo the ring and sends him running toward Mount Doom with vague instructions and little help. Favoring the prospect journey over the post-sale customer journey is a huge missed revenue opportunity for SaaS businesses, who underinvest in their customer retention strategies. Research has found that:
- The probability of selling to a new prospect is 5 to 20%. The probability of selling to an existing customer is 60-70%. (Marketing Metrics)
- 80% of a company’s future profits comes from 20% of its existing customer base. (Gartner)
- A 5% increase in customer retention can increase profits by 25% to 95%. (Bain & Company)
The good news is that priorities around customer engagement and retention are shifting: 63% of C-suite leaders at global companies believe that the customer experience is a “very important” investment priority, with 42% having boosted spending in this category in the last three years, according to The Economist Intelligence Unit. Most companies have a few disparate programs (read: email blasts and NPS survey sends twice a year) in place to engage customers post-onboarding. However, it’s hard to find sophisticated programs that make long-term customer success, retention, and advocacy a predictable outcome. In this blog post, we’ll walk you through the three-part framework for creating meaningful customer relationships that last. Creating these relationships is the foundation for retaining customers long term—not just as customers, but also as advocates.
DNM: The foolproof framework for customer relationships that last
The best method for turning passive customers into power users—and then into vocal advocates—is called the Discover, Nurture, Mobilize framework (DNM). This method eases customers into bigger asks—such as renewals, upsells, and referrals—by first understanding their needs and delivering value. You wouldn’t propose on a first date, so why ask customers to commit to a renewal if you’ve barely built a relationship with them since implementation? Forging tighter customer relationships may sound like it requires a lot of 1:1 outreach. However, with the right strategy and the right technology, it is possible to make the process of building closer customer relationships systematic and scalable.
Here’s how the DNM framework works:
Stage 1: Discover
At this phase, you need to discover who your advocates are and then invite them into your program. Some common ways to discover advocates are finding super-fans on social media, or pulling a list of high NPS scorers. In the Discover stage, you also need to identify your users’ persona(s), including what they value and what they want to learn from you. This involves going beyond just product needs and professional pain points. Gaining insight into their personal interests and demographic information will also make it easier to engage with them. It’s important to collect and store this data in a way that will make segmenting your customers and tailoring their experience easier in the future. The key goal: Understand what will motivate customers to engage in your programs, so you can create a plan to build strong relationships with them in the Nurture stage.
Stage 2: Nurture
At this phase, your objective is to educate your customers with helpful resources and give them opportunities to engage with your team and your wider user community, so you can guide them towards success. You should also focus on creating moments of surprise and delight to build goodwill with your advocates. Finally, you should start collecting feedback to understand which customers are on the path toward advocacy, and which may need extra support. The key goal: Give value freely to your customers without expecting anything in return. This way, when you ask for something in the Mobilize stage, they’ll be likely to reciprocate.
Stage 3: Mobilize
In this final phase, you need to inspire customers to act on the goodwill they feel toward your company through various forms of advocacy. You can achieve this by clearly explaining how advocacy benefits both the customer and your organization. It’s best to start with small asks before moving onto larger ones. When customers advocate for you, it’s important to show them appreciation through sincere thanks and rewards. This will cement your relationship, and make them want to advocate for you again in the future. The key goal: Motivate customers to perform acts of advocacy, so they feel psychologically committed to your organization (and therefore less likely to churn).
Why building customer relationships is the key to customer retention
You may think that the biggest predictor of customer renewals and retention is success with your product. However, since other companies may be able to replicate your technology, having a product that works is just table stakes. The real differentiator is how you make customers feel. McKinsey & Company reports that customers who are emotionally engaged are three times more likely to repurchase a product and recommend it to others. And the best way to make customers feel an emotional connection to your brand is by building meaningful 1:1 relationships with them. Customers that have a strong bond with your company are more likely to invest time in your products and forgive mistakes. They’re also less likely to walk away if it means leaving valuable relationships with your team and your larger customer community behind. If you’re ready to make your customer retention strategy a priority, here are some resources to get you started: