Customer Retention Cost: A Complete Breakdown

Customer retention cost depends on many other factors and costs, from user onboarding to user engagement.

To reduce retention costs, it is important to understand those other metrics in detail.

A holistic, top-down view of the customer adoption process, therefore, is the first step towards improving retention metrics.

Customer Adoption: A Complete Breakdown

Customer adoption – or user adoption, depending on the circumstances – refers to the implementation and integration of new products into a user’s workflow or environment.

Since retention and adoption are so closely linked, it is important to understand the adoption process in detail.

Let’s look at a few of the most important aspects of the adoption process, which will help us better understand all of the elements that contribute to retention costs.

Customer Experience

The customer experience refers to the sum total of interactions and experiences a customer has with a brand.

Closely related to this concept are:

• The user experience
• The product experience
• The digital experience

All of these cover roughly the same territory, though the focus differs.

In all cases, the experience directly impacts how customers feel about and engage with a product, service, and brand.

Customer Onboarding

Onboarding represents one of the most crucial stages in the customer relationship.

During onboarding, customers begin using a new product for the first time. It is during onboarding that they form their first impression of the product and, often, the brand.

To reduce retention costs and improve the customer experience, it is important to:

• Track important onboarding metrics, such as customer sentiment, abandonment, engagement, proficiency, productivity, and retention
• Design a structured onboarding program aimed at improving those metrics
• Analyze the program’s performance, then adjust onboarding efforts as needed

Properly executed onboarding programs go a long way towards improving the customer relationship. Those improvements, in turn, can decrease the costs associated with customer service and technical support.

Customer Service

Customer care is one of the costs commonly associated with customer retention.

Maintaining a good customer relationship, after all, requires ongoing support from the customer service department.

However, it is important to drill down further into customer service, since not all customer service is created equal.

In today’s digital economy, there are a few ways to enhance customer service and decrease retention costs:

• Provide personalized customer care through digital self-service platforms
• Ensure that customer service is provide across multiple channels and devices
• Minimize the time it takes to respond to and solve customers’ issues

The more convenient and swift the customer care, the better the customer experience – and the lower the overhead.

Technical Support

When customers need help solving a technical issue, or when they have questions about how to use a product, they will typically contact technical support.

These costs are an inevitable component of any customer retention effort, but they can be reduced.

Here are a few ways to do just that:

• Use software that provides self-service technical support options, such as digital adoption platforms (DAPs)
• Offer product tours and walkthroughs during the onboarding process, which will help familiarize users with the product early on
• Maintain an online repository of help articles, that is, a knowledge base
• Ensure that customers have quick access to human support staff when needed

Ultimately, the goal with technical support is to optimize the customer experience as much as possible, since better customer experiences improve retention rates.

Those increased retention rates, in turn, reduce the burden on customer acquisition teams.

Customer Acquisition

The fact is, most companies focus too much on acquisition.

This overemphasis on acquiring new customers, unfortunately, can lead to poorly maintained customer relationships.

And poor customer relationships, in turn, lead to higher retention costs.

Acquisition is most certainly important, but as many marketing experts have pointed out, it is easier to sell to existing customers than to new customers.

Acquisition, therefore, should not replace other metrics that affect retention costs, such as customer service, technical support, or product design.

Product Design

Retention rates and costs also depend very heavily on the core product or service itself.

No matter how stellar the customer service, technical support, or relationship management, a poorly designed product will always sink retention rates.

For this reason, it is important to understand the role that products play in the user experience and the adoption process.

Among other things, well-designed products are:

• Usable
• Useful
• Lovable

Ultimately, well-designed products will decrease the need for technical support, customer support, and training.

Naturally, those relationship management functions can never disappear entirely, but they can be reduced with good product designs.

Customer Needs and Expectations

Customer expectations change due to several causes, including:

• Technology-driven innovation
• Digitization and digital transformation
• Major world events, such as COVID-19
• Time and generational changes

To keep up with shifts to those expectations, it is important to develop a customer-centric organizational culture, customer-centered design practices, and customer-first business strategies.

When organizations can stay agile and build their strategies and products around customers’ needs, they will have a much easier time retaining customers.

As a result, budgets can shift to focus on earning profit from existing relationships, rather than on acquiring new customers.