Reducing churn and increasing retention
Bootstrapped companies tend to have better retention and less churn than VC-backed companies. This is because businesses with funds from outside sources tend to focus more on acquisition and worry about a retention strategy later. Whereas a lot of bootstrapped businesses think tactically about retention from the outset.
Ideally, every business owner, whether bootstrapped or VC-backed, would have a retention strategy and some tactical plays to help reduce churn and increase your customer lifetime value (CLV).
Here are three tactics to consider:
1. Optimize for longer term plans
Longer-term plans have 200%-800% higher CLV** yet most businesses don’t ask customers about term length after initial sign up.
To get more of your customers on long term and annual plans, check in with them every 45-60 days. Use incentives, including discounts (e.g. 10 months for the price of 12) to encourage your customers to commit to a longer subscription.
2. Implement cancellation flows
Cancellation flows give users alternatives to cancelling during the offboarding process. The idea is to remind customers of your products' value and offer suitable alternatives so that, ultimately, they remain your customers.
The result of well implemented cancellation flows? 10-15% fewer cancellations**.
In addition, these workflows allow you to gather data that you can use to prevent churn and improve customer retention more effectively going forward. For example, an exit survey will help you understand why customers are no longer interested in your products or services—you can use this data to identify the problems and prioritize improvements to your product or service offering accordingly.
3. Understand your buyer personas
Every business needs as many customers as possible, especially in a recession. But before making efforts to attract and retain more customers, you need a snapshot of your ideal customer — a buyer persona.
- Buyer personas improve targeting because you can focus and adjust your content to reach the people or businesses who will benefit most from your product and stay customers for longer as a result. Hello better conversion and higher CLV.
- They empower your sales team with clear information about who they are targeting. This enables them to address problems and present the right solution more effectively.
- They help you identify negative personas, that is prospects who aren’t the right fit for your business.
- Companies with buyer personas grow 10-20% time faster. They also have a 20-30% lower customer acquisition cost (CAC).
Despite the benefits of really understanding your ideal customers, buyer personas aren’t prominent in either VC-backed (one-in-five businesses) or bootstrapped businesses (two-in-five)*.
Get started with yours today by using the below framework to develop your business’ minimum viable personas: