Customer retention is a critical business growth aspect. According to Review42, a 5% boost in customer retention can result in a 25% to 95% increase in business profit.
Today, we have a chance to talk to Jason Rainbird, the managing director of Flowbird Ltd, and have him share his insights and best practices to implement customer retention strategies.
Guide to Article
- Guide to Article
- Jason Rainbird is passionate about customer retention strategies.
- Q: How did you go about increasing customer value? What is a good customer retention strategy?
- Q: What is bundling, and how does it work?
- Q: What are the information advantages for those buyers who have a trusted physiotherapist?
- Q: Is the transition to a subscription model something that can help increase customer retention and revenue?
- Q: Should companies utilize a CRM to identify high-value customers and increase client retention?
- Q: What is the revenue ratio, and how does it impact the customer retention rate?
- A case study on applying proactive customer retention strategies
- The 11 processes to increase customer retention and revenue
- Q: How could Flowbird Ltd help people handle their leads and sales process?
Jason Rainbird is passionate about customer retention strategies.
Because I think at the end of the day, you’ve built up a client base, you’ve developed trust, which seems to be an afterthought. We’ve got you, and you’re a customer; sit there and keep buying. I think that’s a massive shame because many companies are spending a lot of money to get new inquiries.
When the reality is they can grow their existing customer base, they can extend that in value and spending. It has an added benefit if that leads to more leads as well because if you’re looking after existing customers very well, then your referral processing grows; you start to get your own thing. Treat it as your gold mine. That should be the first port of call for most companies to grow the business.Jason Rainbird
I started off looking at CRM back when it was a green screen. How does it work? How do we link it all together? How do we share that information? That’s my background. After that, I got into a firm, worked as a CRM manager, and started Flowbird just under ten years ago with a passion for driving that.Jason Rainbird
Q: How did you go about increasing customer value? What is a good customer retention strategy?
The easiest way of looking at it is we look up and down what we call the food chain. The part of that process is looking at what they bought before? Look at what they’ve bought further down after buying your service, and then map out what we can add to our portfolio products that complement what we do.
It enables you to increase and sell off the back of that, so it can be very simple things that you can add on; you can tap into the other thing that can generate a lot of income—starting to look at referrals as well.
If you can’t physically supply the ups and downs in the food chain process, you can refer people and make money off the back, which will grow your customer revenue from an existing business to another thing.
We look at bundling as a big part of what we do. For example, if you have three or four products set at a particular value but repackage those as a service or bundle, you can obtain more income by pulling those together.
If you’ve got one product and you can only sell that in once, that’s fair enough. But you’ve then got a look at other ways of doing that. That’s how we would look at it as part of that process.
A company selling mortgages, what about adding life insurance? What about content insurance? What about linking up with an estate agent? What about the other things that you can bolt on to your service to increase the overall value of your customer? So that would be our general argument around that or general discussion.
Q: What is bundling, and how does it work?
I’ll give you a straightforward example. We worked with a physiotherapist company, and they were selling hours. You pay your money, you turn up for your hour, and you’d go again, and then the next time you will have some ailment, you would turn up again, and you would spend another hour.
So what we’ve worked with them is packaging that up with other fitness-related issues, diet, and nutrition. The other services that they can bolt-on. We started a whole hot wellness package to sell to a customer. In their particular case, they were selling the packaging, but other people were delivering that service because they were experts at what they did.
But, we’ve got nutrition involved, we’ve got a fitness expert involved, we’ve got whatever other treatments were required to package that together. We put together one of the interesting things with them: they were selling things for 100 pounds a pop, and we put together a much bigger package for them, and the process was they might never sell that.
But the very fact that they had that on the price list escalated the overall value of their business because clients were going at them. They’re not just selling an hour thing, they’re selling the whole thing, and so it lifted their profile as well as a company.
So that was a straightforward example of packaging up things together because it’s a perceived value for the customer at that point. As a customer, I’m now getting much more value for money, and at the same time, the company is making a lot more money, and it benefited the service as well.
I think they were selling hours in that particular case, but they were eventually running out of hours because you can only do a certain amount. Still, suddenly they had other revenue streams coming in because they were outsourcing some of that work as well. So that was money for recommending a nutritionist or a fitness instructor. So that also enabled them to grow the business without necessarily taking on more staff. So it worked well for them.
Q: What are the information advantages for those buyers who have a trusted physiotherapist?
I think yes. We’re talking about content marketing, and that’s where content comes in because one of the things we want to be able to do is that you’re turning up for your physiotherapy appointment. You’re being given your piece of content that talks about physiotherapy.
There, you’re being introduced to the nutritionist, the fitness expert, and you’ve got trust in the person you’re working with. Most people know that if you’re an expert on one particular service, you’re not necessarily an expert at another. Still, the fact that you’re recommending that person already, you’ve overcome that process.
We all know as businesses that referrals are critical to how we work. So having that direction, you’ve already overcome that barrier of trust, and now you’re saying this is the nutritionist we work with, these are the services we offer, go and talk to this person, etc.
I think that’s an important part of the whole process, and it enables you to get past that first barrier of that referral process. So I guess that’s how it works; you don’t necessarily have to have a single point of contact, but you’re still going back to the physiotherapist because that’s your first port of call. Now you’ve developed relationships with other people.
Ultimately, it benefits the nutritionist who is doing the same thing. They’re now saying we work with this physiotherapist. I’ve spoken to you; you need to do this, go and talk to the physiotherapist. So you’re building up this core network of skilled people within the same area.
So it has a double benefit for you as a company. It works well, and then the content, as you say, is part of that process to deliver that message without being in your face; no complex sales-type approach, and that’s where the content comes in.
Q: Is the transition to a subscription model something that can help increase customer retention and revenue?
Absolutely, it’s something that we drive, one of the services that we offer as a company by a process called Value Builder. We look within all companies that we work with whether they can transition a product to a retainer or subscription basis because it helps with the whole revenue stream.
It helps with the company’s value, and quite often, you’re able to take a client’s product or service and, instead of it being a one-off sale, change to a rental process. Over the last decade, the most significant change that we’ve seen is the SAS market, where suddenly people were selling large chunks of cash for software. But, we’re now in an environment where that just doesn’t exist anymore.
Everyone rents software, yet in that mindset, when it started coming out, it was people like no one’s ever going to rent software. But now we just take it for granted that you pay your 10, 20, 30, or 40 pounds per month, and you get access to the system.
So I think when we talk to our clients about that, we also look at how they can do the same thing and convert their products into a subscription-based model and what’s the best option. We’ve got 11 concepts that we look at and go if we can do any of that. Whether that’s a contract or just monthly subscriptions, as a way of converting those products over, that’s critical, and in the marketing world, a lot of it is retainers.
Q: Should companies utilize a CRM to identify high-value customers and increase client retention?
There’s lots of different analysis around CRM elements and what makes a valuable customer. From your perspective, you may have a high spending customer, but as you start to dig in a little deeper, you find out that you’re not making too much profit on it because maybe the margins weren’t excellent, or maybe their issues are polite words, or perhaps they’re needy and so.
Therefore, you’ve got to look at that as a process. You’ve also got to look at the whole process of how long that customer is going to stick around? What’s the lifetime value of that client? Can it cover the cost of client acquisition? All these different elements in the system are what we are keen to look at from an analysis perspective and revenue ratios.
Most companies lose a customer gradually; it’s never a divorce-type scenario. They’re moving their money onto someone else, and you don’t notice it. It diminishes in terms of revenue stream, and then suddenly you get the phone call, “okay, actually we’ve switched, and we’ve been switching for the last year.”
So one thing we’re keen to look at is ratios of how much activity do we have this year over last year? How much revenue did we have over last year? How many calls did we have this year and over last year?
The year is arbitrary because it depends on your sales cycle as a process, but it’s a meaningful way to flag it to the sales team. We need to be aware that this company’s things have dropped off. We have less stuff going on. We need to be jumping on this and dealing with it much sooner.
So a CRM system is why I always say to the team about logging a phone call and logging an email into the CRM system because it’s a quick indication if we haven’t heard from these people in six months; something’s going on.
But if we’re not registering that information, we don’t know what’s going on. The most fundamental and essential element of any CRM system is to log phone calls, emails, and communications. If you do nothing else, that can be vitally critical to what you’re doing because there’s so much you can gain just from that data.
I had a conversation with a client yesterday about it. What are the conversations? What happened when the last conversations were? Utilizing that in your day-to-day job but then having the ability to read back into that and go what’s going on with this particular person? What’s going on with a specific client? So that would be my basics, and then after that, it’s all sorts of trends: what the company’s buying and what they’re not buying?
Doing that kind of analysis of if they’re buying this product, could they be buying these? What particular angle do we do, website tracking as what pages they are visiting that they’re not buying those products or services? What can we do to encourage them now to go down that particular route? So there’s lots of stuff we can do with the CRM system, which is your gold mine of data.
Q: What is the revenue ratio, and how does it impact the customer retention rate?
It’s nothing too complicated. We do a calculation based on the last 12 months and the previous 12 months and then a division between those two. We do this calculation either monthly or daily, depending on the systems and everything else.
So give you a simple analogy: from the previous 12 months, the customer was spending 10,000 pounds, and this year, they’ve spent 8000 pounds, you instantly see that 80% revenue is dropping off. But that number is then flagged up to you as a team.
So if it hits 80%, you suddenly go up. Many companies will do that; they’ll just take the last 12 months, and they’ll go okay; where are we with this? But I think it has the analysis, the trend between those two where you can go back further, and you can have a more extended period, and you can have shorter periods, it doesn’t matter. The process is having an analysis of whether there is a movement.
It’s in the negative process, but you can have a positive one as well. So if they were spending 120 and 10 000, then you’ve got a ratio between those two as well. So it’s an important process.
A case study on applying proactive customer retention strategies
We worked with a company, and we put the process in place and had a total revenue. We had a trigger point within the company of 80%. When the figure hits 80%, it triggers an activity into the sales team and puts a report on screen for the sales team to say these are a list of your “getting close to the mark type of people.”
We did a couple of things off the back of that. We triggered automation out to the client based on the last activity date, which said it’d be good to jump on a call to ensure everything is okay. So it was driven by that; it was very low-key; it wasn’t meant to be detrimental to the salesperson but triggered conversations.
Sometimes, it was a real thing. There was a particular business side where they’d spent a lot of money on one specific project, and it was dropping off, so it was perfectly acceptable. We started sharing what we spend with you or with another company because of Xyz, whatever that reason is. Because we’re not getting the service that we think we should be getting. We’re able to rescue it.
The other thing that we also integrated into that was the potential value. We had a calculation so the salesperson would go, see the customer, talk to the customer, and get what they consider to be the total potential spend of that company.
With that company, I would go out. I’d say, “Right, I reckon this company in total, they would spend 80,000 pounds a year as a process. We would then monitor the ratio of actual spend with that is, and have that as a flag. Then you can say, “well, we’re dropping; we’re dropping above, or we’re dropping below. We think we should have this sort of borderline of above 25. And above 25 and over 75, if they’re spending between 25 of that potential with us, we’re pretty happy because we know full well that I may be spending a little bit over here, a little bit there.
But at any movement on that, we would be triggering off activities and alerts to the sales team to follow up on that as quickly as seeing because a salesperson doesn’t have the time and doesn’t have that knowledge to do that because there’s too much going on.
So we’re bypassing all of that and cutting through to the data and then making that available to the sales team. For example, here is a list of your five calls today or three calls today because of the issues that we’ve detected in the CRM system. So that’s a real case, and that was highly effective.
The 11 processes to increase customer retention and revenue
We’ve talked about some of them already including the fast arrangement like contracts. We talk about renting tools; it’s where you can take a company through a process and say what can we do or any kind of recurring revenue process.
The 11 processes are guided around what makes the company more valuable. The most valuable thing that generally most companies do is ongoing contracted agreement but it could be having a product that people need to come back and buy on a regular basis.
You might introduce another product line because I always use the analogy of milk as a process but if someone’s coming into the shop and buying every day which is good but, there is also potential to sell more to them through a software contract which could be two, three, four, or five years long.
As a process of things, the other simple ones are renting out property. You get a property and you’re rented out. You’ve got recurring revenue commissions on software. We mentioned before about introducing third-party products and services and then agreeing a revenue stream from those as part of your revenue even though it may be small forms.
Q: How could Flowbird Ltd help people handle their leads and sales process?
We turn up to a lot of companies. They had very convoluted and very complex processes in place and I think it confuses the hell out of salespeople. I’ve sat with salespeople and we’ve got an 11 stage pipeline set up. They’re like, is it this? Is it this one? So the first thing that we will look to do within a company is to streamline that down to as short as we can.
I think the most we turned up with one company and had something like 26 different pipelines with multiple stages and we’re like who knows what’s going on here? What is your revenue potential? What is your forecast of business from all this stuff?
So strip that down literally to two or three pipelines and then and the maximum we try and aim for in terms of pipeline is what we call five or six. If we can get away with four, five, or six? It’s about the right number because I think it does things. People want your sales process to be very obvious. I want the sales process from the salesperson.
The sales process needs to have a thought process around what’s been delivered at the moment. Have we delivered a quote? Have we had a discovery session? Have we had a proposal? They just need to be that simple because then what you’re able to do is to recalculate that backwards and say, we know that you need to do this amount of business every month, every quarter, we know that to do that amount of business, you need to be putting forward this number of proposals. So the ratio is between there and there.
Therefore you need to have this many discovery meetings, sales meetings, sales calls and therefore if we go back forward to that, we know I can say to a salesperson right based upon your ratios, I know full well that if you make 10 prospecting phone calls today and every day, you will hit your sales target.
That’s all you need to worry about; pick the phone, ring another five people, bring another customer up, bring whatever it is and you then start to drive that through and that simplifies the sales process.