Retention is the new customer acquisition
4 Minute Read
There are two key mistakes that companies often make when it comes to customer renewals:
- They assume customers will renew, and
- They leave it up to the customer to renew instead of being proactive about retaining their business.
Both of these approaches put revenue at risk, both from a perspective of actually getting the renewal in the first place and from the months that the upsell is deferred.
Getting customers to renew subscriptions or contracts goes beyond retaining existing revenues. Here are two interesting statistics: The probability of selling to an existing customer is between 60% and 70% compared to a new customer which is significantly lower at between 5% and 20%.
In today’s highly competitive marketplace companies have to work harder to retain customer loyalty and a key factor is customer experience (CX).
If customers have enjoyed a good experience then the decision to renew is easy. If the path to renewal is further smoothed by offers relevant to a customer’s preferences and needs and the process is simplified, then the chances of renewal increase greatly.
This is why customer experience optimization is one of the most valuable strategies companies can leverage to increase renewals and customer lifetime value (CLV).
How personalization helps increase renewals
Consider the case for a customer renewing their mobile phone contract. For a brand it may seem obvious that customers will want a new phone with new technology and features, and many might. But for others, the idea of having to sort through what options they’re eligible for, then complete all the paperwork may already feel like a lot of work. Then to have to transfer all their data, contacts, and favorite apps once they get the new device takes even more time and effort. All of this creates friction points in their journey which reduces the percentage of customers renewing.
There’s a saying: “If it ain’t broke, don’t fix it.” From a customer perspective this can be very true when it comes to how they approach renewals, especially when it relates to a mobile phone contract. Sometimes it feels easier to just carry on with what you have. It’s comfortable, known and familiar, and requires no effort at all. Add to this an increased awareness relating to the growing problem of e-waste and customers are more inclined to keep using their existing phones for longer.
This highlights why personalization and customer experience have such an important role to play. If brands wish to increase renewals and customer lifetime value they need to understand what’s important to customers and what’s influencing their decision to renew or not to renew. For example: highlighting an offer to trade in an old phone that can be recycled, as well as offering migration assistance may help a customer overcome any hesitation they have about getting a new phone.
What’s the most effective form of experimentation and personalization?
Historically, brands have relied on third-party data and A/B testing tools to better understand customer buying behavior, preferences, and perceived needs. The challenge is that today’s marketplace is much more dynamic and competitive and the speed at which everything changes has increased significantly. It’s no longer enough to know what customers bought previously in order to remain competitive. With increasing customer expectations, personalization requires understanding what’s important to customers right now in real time and then having the ability to serve it to them while they’re browsing so that it’s easy for them to take action. This means understanding their intent and how that is driving their goal for engaging with a business,
The increased adoption of digital channels used by customers to interact with brands presents both opportunities and challenges.
The challenges come from the lack of face-to-face or voice encounters. Without that queue brands have to rely on how customers respond to ideas at different touchpoints and how they progress in the journey. Targeting the right data and being able to validate and analyze it fast enough to respond in real-time with relevant offers is the ultimate goal. The good news is that this is made possible with AI-driven experience optimization. It’s an opportunity for brands to engage more meaningfully with customers and delight them with personalized offers at the right time to increase renewals.
How AI-driven experience optimization increases renewals
With renewals, brands have an advantage in that they already have valuable customer data that can help them tailor offers to a customer’s unique needs. Information on their usage, type of contract, and previous device provide at least some indication of what they might be looking for when they renew.
Information can be drawn from the company’s content management system (CMS), digital asset manager (DAM), and customer data platform (CDP) indicating the customer’s eligibility for specific types of contracts and when they’re due for renewal. Any qualifying contracts that are on special can be offered as promotions as part of the experience they’re served when they log in. Integrating this with AI-driven experience optimization results in several key benefits:
- Decreases the potential for customer churn.
- Reduces the time customers take to upgrade or renew.
- Automates the process of presenting relevant offers at the appropriate time
- Increases customer engagement and satisfaction
- Improves renewal success by reducing friction in the customer journey
- Improves key metrics such as average order value (AOV) and customer lifetime value (CLV)
AI-driven experience optimization learns from real user behavior and how customers respond to ideas. The real advantage is there’s no limit on the number of ideas that can be tested. AI-driven experimentation takes a handful of ideas, creates hundreds of variations of those ideas, and then serves them in thousands of combinations to create unique experiences for customers. The more data available, the more advanced and personalized the optimization becomes. This results in more accurate insights generated because each change in customer behavior fine tunes the experience for greater personalization.
AI-driven experimentation and personalization revolutionizes the basic principles of A/B testing by enhancing, accelerating, and scaling capabilities so that brands can start to close the gap and meet customer expectations for more tailored experiences.
AI-driven experience optimization is a dynamic process that is ideally suited to today’s dynamic and highly competitive marketplace. For brands looking to improve customer retention and renewals, having the ability to personalize experiences and reduce friction is a huge advantage. One well worth leveraging to improve customer lifetime value.
Think CX, Part 22
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