Are you trying to increase customer retention by improving customer happiness?
Recent research by ChurnRX shows that this approach does not work. Despite company investments in customer experience generating improvements in customer happiness, customer loyalty and retention have continued to decline.
“It turns out that there’s literally zero correlation between how satisfied customers say they are and how long they stay,” according to Greg Daines of ChurnRX.
For years account managers have focused on keeping customers happy as they strive to retain them. So, if happiness doesn’t increase retention, what does? The short answer is “customer bonding”.
We recently hosted a webinar with Greg, called Customer Bonding to Maximize Customer Lifetime Value, where we discussed customer bonding. He explained what it is and shared insights from the latest ChurnRX research on the topic and what it means for account managers, CSMs, and customer engagement professionals.
Read on for the highlights of our discussion where we learn what customer bonding is and how it impacts customer lifetime value.
Customer Happiness Doesn’t Boost Customer Lifespan
ChurnRX looked at customers who’d had negative experiences versus customers who’d only had positive experiences. Surprisingly they found the lifespans of customers who had negative experiences were twice as long as those who only had positive experiences.
These negative experiences occur when a customer is trying to achieve results with your product and has questions or discovers limitations, causing them to get frustrated. These customers are more engaged with your product or service and are most likely to achieve measurable results with your solution.
“The best predictor in all the data we’ve ever looked at,” according to Greg, “is customers who get some kind of measurable result stay six times longer on average than customers who don’t.” Greg refers to this as “customer bonding.”
What is customer bonding?
Customer bonding is the reason why customers stay with you rather than leave or switch to a competitor.
This idea of customer bonding was coined by Professor Arnoldo Hax of MIT Sloan. Hax said a customer is bonded to a vendor when they can no longer visualize their success without you in the equation.
Customer bonding is different from loyalty. Loyalty is more like having a good relationship, and an appreciation for what the vendor has done. “Loyal” customers will leave you in a heartbeat for a lower price or for almost any other reason where bonded customers will stay.
This isn’t surprising, though, since results, not relationships, are the greatest predictor of retention and customer lifespan. Customers who are achieving results are bonding with vendors that help them attain these business outcomes and see the vendor as an essential factor in their success.
Indicators of Customer Bonding
How do you know your customer is bonded with you since they’re not likely to come out and say they can’t live without you?
The lagging indicator of customer bonding is when the customer is getting results. Customers that are achieving their desired measurable outcomes are likely to renew.
Leading indicators are any indicator that they’re engaged and trying to achieve their desired outcomes with your solution. This includes things like support tickets and showing up to meetings that you set with them.
It’s a very bad sign when customers don’t show up to the meetings you schedule with them. This is an early indicator that you are off track with the customer.
The ultimate leading indicator that a customer is on the right track is whether they are doing what it takes to get good results. So, behavior change is a critical factor here.
But why don’t all customers change their behavior? “It turns out that the majority of our customers don’t know how to change, and they don’t know why to change,” according to Greg.
How to Set Your Customer Up for Success
The best way to set customers and yourself up to successfully achieve measurable outcomes starts when account managers help customers identify their desired business results. If the customer doesn’t have a clear outcome, they don’t have a reason to change their behavior. This sets them up for failure.
To overcome this, account managers should guide the customer through a thought process to help them define how they want your product or service to impact their business.
Start by proactively identifying the key business outcomes your solution can create. Then ask your client to choose from those key results. Next, provide them with three to five things successful customers do to achieve those outcomes and gain agreement from the customer on how success will be measured.
This is how to have a positive influence on your customer’s behavior.
Share Measured Results
It’s essential to routinely share measured results with your clients so they can gauge their progress. Greg recommends scheduling a brief meeting with the customer he calls the EBR. It’s a 15-to-30-minute check-in on measured results. It goes like this:
- Here are the results we agreed you were focused on.
- Here’s how you’re doing.
- Here’s what you could do to make them better.
Greg points out, “It’s even good if they’re bad results. The customer wants to know.”
You’re likely to get better engagement if you tell your client business leader, owner, or sponsor when scheduling, this meeting only needs to be 15 minutes.
Rinse and Repeat
To solidify the bond, retain customers, and maximize customer lifetime value, this needs to become a cyclical process like Our KAM Process™.
- Identify your customer’s desired measurable result and how it will be measured.
- Tell them what steps they need to take and behaviors they need to change to achieve their desired outcome.
- Track progress toward the goal and share the measured results.
- Show the customer what’s next after a goal is achieved.
When you follow this process, renewals become the next logical step.
Maximize Customer Lifetime Value
It was thought that customer happiness and satisfaction were the keys to customer retention.
Now we know that this approach doesn’t work.
In fact, the customers you retain are the ones achieving measurable results by using your product or service. When customers realize that your solution helps them drive business outcomes, they see you as an essential factor in their success and bond with you as a vendor.
Customer engagement in the process and with your product or service, and goal achievement are indicators of customer bonding. By contrast, failure to change behaviors to achieve results and not showing up for scheduled meetings are signs you are off track with a customer.
Account managers can set their customers up for success by helping them identify their desired measurable results, guiding them through behavior changes to achieve their goals, tracking and measuring progress, and sharing results, even if they are negative.
For the greatest success, repeat this process, establishing a new goal as one is achieved, so the customer knows what’s next. This makes renewals a natural next step, boosting retention and lifetime value.
Ready for more insights from Greg and other great customer engagement thinkers? There's still time to register for KAMCon next month!
