How to Increase Customer Retention with a Data-Driven Customer Experience

by Andrew Wallace
8 min read

It’s cheaper to keep existing customers than to acquire new ones. In fact, it costs 5x more to attract new customers than it does to keep existing ones. 

Of course, knowing that customer retention is more valuable than customer acquisition doesn’t help you understand how to increase customer satisfaction and longevity. 

The pillars of customer retention are: 

  • Provide quality support;
  • Communicate effectively;
  • Deliver a consistently positive experience, and; 
  • Delight clients at every touchpoint. 

That’s easier said than done. If you don’t know what’s going right (or wrong) in your MSP operation, you can’t replicate the good or cleanse the bad. 

To make smarter customer retention decisions, you need to base your optimization on data, not guesswork. 

In this article, we’ll share how to improve customer retention through a data-driven customer experience. We’ll examine how to collect valuable data, why it matters so much, and how to use it to your advantage. 

Table of contents

  • Why collecting data gives you key insights into your MSP operation 
  • How a data-driven customer experience helps you boost loyalty and ROI
  • Wrapping up

Why collecting data gives you key insights into your MSP operation 

Reducing churn can improve ROI and make your business more valuable. In fact, 83% of MSPs surveyed by IT Glue in 2019 reported that lower churn led to higher revenues. Conversely, of those that experienced higher churn (over 10% in a year), 29% reported lower revenues.

Source: IT Glue Global MSP Benchmark

Interestingly, in the 2020 IT Glue Global MSP Benchmark Report, there was a weaker correlation between churn and revenue growth. This likely is due to MSPs “churning strategically”, or parting ways with low-value clients. It could also be a result of customers going on furlough due to COVID-19. 

Both reports allow us to draw the same conclusion: customer retention from valuable customers improves revenue, and low-value customers can hurt it (hence, why strategic churn is sometimes necessary).

But none of this data matters if you don’t understand your churn and retention rates. We don’t simply mean knowing the numbers (i.e. 10% churn rate in a year).

We mean understanding the reasons behind churn and retention. To reduce churn and increase retention, you need to know the ins and outs of the customer experience. You can make hypotheses based on observations, but that’s not good enough.

For example, if you have an above-average retention rate, why is that? Knowing the answer could help you:

  • Replicate and enhance the processes or workflows that are working
  • Empower your staff to continue doing x, y, or z positive behaviors
  • Reward your team for said behaviors, effectively boosting morale and productivity
  • Improve the quality of QBRs, as you can explain why your tactics are working, which leads to more meaningful discussions and data-driven decision-making 

Similarly, if you have a poor retention rate, knowing why could help you to:

  • Fix a broken process or workflow to plug the gap
  • Retrain your staff on how to do x, y, or z better (and why this change is necessary)
  • Provide a better customer experience at every touchpoint
  • Have meaningful QBR discussions about what went wrong, why, and exactly how you plan to improve the current situation

So, how do you go about getting the answers to these questions? 

With a tool like SmileBack, you can collect both Customer Satisfaction (CSAT) and Net Promoter Score (NPS) data with minimal friction.

NPS data and CSAT survey responses give you both an aerial overview of customer sentiment and relationships, as well as a detailed report on specific interactions, workflows, and processes. 

By keeping your finger on the pulse at all times, and in real-time, you can be aware of red flags, see when something works incredibly well or not (and why), and accurately measure customer satisfaction.

Take LanDynamix, a South African-based firm in the IT Manager Services space. They use SmileBack to collect real-time feedback from their clients and note that it helps them “know where we really stand.”

LanDynamix Dashboard tracking

With a clear-cut view into what their clients truly think about their working relationship, they’ve been able to make more personalized improvements. Tailored services are key, as a one-size-fits-all solution may satisfy the crowd but remain unmemorable. 

Crucially, clients that are middle-of-the-road satisfied (i.e. passives) rarely feel incentivized to provide valuable feedback. Nothing is wrong per se, but they also aren’t “wowed”, so there’s not much to say (in their opinion).

This is why NPS data wins at value. By eliciting your clients to provide honest and open feedback (no matter whether they are promoters, passives, or detractors, but especially from those that are neutral or dissatisfied), you gain valuable insight into how you can improve the experience. 

Whether that be tailoring a more personalized solution, fixing an issue before it manifests itself to the point of no return, or realizing that you have a rich source of referral opportunities, collecting data at every satisfaction point gives you the opportunity to strategically improve.

How a data-driven customer experience helps you boost loyalty and ROI

Let’s take a deeper dive into how a data-driven customer experience helps you make smarter experience decisions, which ultimately improves ROI. 

Capitalize on wins

By gaining visibility into your client’s mindset, you can understand exactly when to capitalize on wins by leveraging referrals or social proof. 

This is key, as quality referrals are generally: 

  • Better customers, because their needs align with your service offerings (i.e. they know what you provide to their friends, so they understand your capabilities)
  • Easier to acquire than cold leads, as they already trust your business (research shows people trust their friends’ suggestions far more than self-advertisement)

Social proof in the form of public feedback, testimonials, or case studies are similarly effective, as it helps you: 

  • More easily land new customers, (research shows that 92.4% of people are more likely to purchase a product or service after reading a positive review)
  • Expand brand awareness and grow authority, as social proof can be used in a variety of marketing strategies, and it engenders organic sharing amongst your audience
  • Build trust with existing clients, because public praise helps you strengthen your community and prove authenticity across the board 
  • Improve lead generation and your bottom line, which means less time focused on cold leads and more time nurturing warm leads, which is better for your bottom line
  • Overcome hurdles with new clients, as they are more likely to be patient and trust the onboarding process as they’ve seen how happy existing clients are
  • Stand out from the crowd, because your business has a Google Reviews presence, making it more discoverable via online search 

Source: G2 Crowd and Heinz Marketing

With SmileBack, it’s easy to showcase your social proof via both Google Reviews and SmileBack’s easy-to-use website widget, and build a positive online presence. This way, when someone types “MSP services nearby”, your business has a better chance of ranking in the search engine results. Then, once they get to your website, they can see that other businesses just like theirs are happy using your services. 

The fastest way to produce more revenue and a better ROI is to be easily discoverable and highly recommended. The common thread? A data-driven customer experience.

Build stronger relationships and identify new opportunities

If you know what your clients like and find important, or don’t, you’ll have an easier time identifying new opportunities that will work. This helps you upsell and cross-sell as you can present relevant and meaningful solutions (rather than shooting in the dark).

For example, if you know a client values security, based on a recent NPS response, perhaps a recently released technology or platform will prove better at stopping cybersecurity threats than the one you’re currently deploying. 

It may hypothetically be more expensive and more costly to run, but if you have built strong relationships with your clients, they’ll be more likely to trust and implement your recommendations (even if they cost more).

This is the perfect conversation for a QBR. With data in hand, you can review the current state of affairs (based on the CSAT and NPS data you’ve collected for this client), present your recommendations, and back them up with research and findings.

This may look like:

  • We’ve closed X tickets this past quarter and Y% of them were positive
  • Of the X% that were neutral or negative, we’ve determined it was because of Y theme
  • Therefore, there’s an opportunity gap regarding Y theme
  • To fill it, we’ve conducted X research into Y options that can solve this specific pain point
  • Here are the specifics of how we think we could deploy this for you, and why we think it will work

Here, you’ve taken a data-driven customer experience and used it to add tons of value to the conversation. You aren’t making any guesses. You know exactly what’s going well, what’s falling to the wayside, and why. Moreover, you’re presenting a solution to solve the problem, based on opportunities you’ve discovered thanks to the feedback they provided.

It’s a win-win. They’re satisfied with how accurate your suggestions are, and you have a better chance to cross-sell or upsell a solution that you know will work and thus improve the experience and relationship. 

Improve operational efficiency and boost employee productivity

With data in hand, you can also improve your operational efficiency, which will work to enhance the customer experience. 

Crucially, a data-driven customer experience doesn’t only help you provide a better customer experience, it also helps you boost employee engagement, morale, and productivity. In turn, of course, this improves client satisfaction.

If your employees are excited about coming to work (literally and figuratively if working from home), they’ll be motivated to follow your instructions. One such important instruction for a data-driven experience is for your employees to actually be motivated to collect and act on feedback.

That’s because you can’t simply turn on a survey and expect it to magically deliver quality results. Yes, surveys are often automated, but sending out a survey is only half of the process—getting your clients to respond to it is a whole other kettle of fish.

First, you need to explain the purpose of collecting feedback to them (i.e. it helps us to help you). Once you’ve got clients excited, you need to teach them how to use it. This is something your employees will need to continuously address and monitor.

That won’t happen if your employees don’t understand the importance of data collection and why on earth you are adding this task to their job description. 

Also, explain that an above-average customer experience is baked into your business’s mission and that you consider it a top priority. And, use it yourself. If they not only hear but see with their own eyes that you find this process valuable, they’ll be more motivated to follow your lead.

A great way to get them jazzed is to provide them with easy-to-understand instructions, workflows, and processes. They need to know what to do in every potential situation so that they don’t become overwhelmed. And, how to respond to every type of feedback so that they manage relationships in the right way.

All of this leads to a more seamless operation and less friction, which makes for a happier work environment and a more motivated team.  

Wrapping up

A data-driven customer experience helps you shift your mindset from customer service to customer success.

Everything we’ve outlined in this article is only possible if you prioritize delivering a satisfying and meaningful customer experience. By simply adopting a customer success mindset, you’re already one step closer to improving retention, and thus ROI.

This mindset, combined with effective data collection, will ultimately help you:

  • Remain proactive rather than reactive
  • Go above and beyond standards rather than simply meeting them
  • Build meaningful relationships rather than maintaining surface-level ones
  • Delight your customers at every touchpoint rather than remaining unmemorable

If you want to talk with us more about how to effectively collect data to improve customer retention, book a follow-up call with our team.

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