How a Lean Startup Can Keep Customers

June 22, 2012, 2:17 PM UTC / Source: Entrepreneur.com

By Steve Blank and Bob Dorf

This is the second of three excerpts from The Startup Owner's Manual, a recently published step-by-step guide for building companies. The first installment is How to 'Get' Customers.

Keeping customers in the web or mobile channels has the same goal as retention efforts in the physical world: to minimize churn by providing great products and services, and interacting with customers often.

Retention is done more easily online, where companies have the incredible power and ability to track and monitor every customer's individual behavior (without violating their privacy).

Loyalty programs and other tactics borrowed from the physical channel can play a significant role here, as can elegant personalized (and often digital) customer service. FAQs, user blogs, clubs, and newsletters help with retention as well.

As you come up with a strategy, remember that retention programs live or die by a close monitoring of customer behavior. You want to learn who's staying, who's leaving and why. It's especially critical to follow the behaviors you most want to improve.

Here are a few examples of what to monitor:

Each customer's start date and sources (such as referrals by a blogger or another site).
Customers' individual activity level. How often do they come? How long is each visit? What's the time span between visits?
Customers' decision to abandon. What were they doing that caused them to do so?
Customers' behavior onsite: what do they click on, and what don't they click on?

Keep the following guidelines in mind as you test customer-retention programs:

E-mail is easy to ignore and at times feels like spam, so be careful about overly relying on it. At least four of five e-mails are never opened, and consumers often unsubscribe.
Consumers often resent "faux" personalization. People appreciate legitimate, helpful personalization ("Here are the sneakers we have in your size, 11D" is far better than "Great buys for Bob"). Don't get lazy and make automated marketing programs your only customer-retention efforts.
Embrace social networks as points of retention. Use them to keep visibility high and to invite customers and friends back often.

Remember, the data that customers give you make personalized retention efforts easy. But you need to collect it. As you observe and track customers' behavior, use that data to create personal one-to-one relationships that guide them to the next steps. (But always respect personal-data privacy.)

Some simple retention tests to consider:

Outreach programs, including welcome e-mails, how-to guides, and phone calls thanking the user for coming aboard and offering simple tips on how to get more out of the product. Consider retention e-mails like these: "We haven't seen you visit in two weeks. Is everything OK?" or "I've noticed you've had a few problems. How can we help?" or "Have you seen some of the new features on our site?"
Blogs, RSS and newsfeeds to further engage customers or users with the product or site.
Loyalty programs (borrowed from the brick-and-mortar world) that encourage and reward repeat visits, purchases, or referrals.
Contests and special events: webinars, special guests, new features, and other reasons for current customers to come back.
Mobile app push notifications: iOS/Android, for instance, gives developers the ability to push messages to users even when the app is closed.
Product updates, which always drive loyalty and retention.
Live phone calls to users shortly before contract renewal is a good option if you have a subscription revenue model. Make them friendly, service-oriented calls, but always listen for signs of potential churn and be ready with a deal, discount or offer to save the customer.
Tips-and-tricks newsletters, or time-triggered e-mails every week or two based on users' on-site behavior or lack of visits.
Personalized customer service and support, conducted digitally as much as possible.
Customer lock-in/high switching costs: If it's relatively easy for your customer to switch from your products to your competitors' (in an existing market) you'll probably have a higher churn rate. You may want to consider tactics to "lock in" your customer to your product or solution (through unique technology, data that can't be transferred—think Facebook and LinkedIn—or high startup costs with a new vendor.)

Lastly, you'll want to monitor and act on at least these basic retention metrics:

Signs of dwindling visits, page views or time spent on the site or app.
Increased time between visits.
Average customer life (how long they stay active) and, if possible later, lifetime value.
Increases in complaints, help or support tickets.
Reduced response rates or open rates on company e-mails.
Organize the metrics around "cohorts," or common groups of customers (like "those who joined in January"). Three-month customers may behave one way while 9-month customers may be much more or less active than their newer brethren.

Check back next week for an excerpt on growing customers.

Steve Blank and Bob Dorf