How to Drive Up Customer Loyalty with Personalized Retention Offers
10 MIN READ
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Updated on September 11, 2024
As your business grows, there’s almost always a point where you’ve zoomed out so far that you can no longer distinguish one customer from the other. The different dots somehow merge to form a larger blob. Individual names get lost and are remembered as ICP definitions.
Everything is fine until you stub your toe on the churn table. Customers you can no longer name are now jumping ship, or at least jumping off yours. That’s bad news in an era when your peers and competitors believe customer retention is either on par or more critical than customer acquisition.
You offer a 20% discount to every churning customer in a bid to hold on to them. Your save rates improve, but you realize you’ve opened a fresh can of worms. That 20% discount is impacting your margins. Bargain hunters are making the most of it while some of your high ACV customers are still … leaving?! You scratch your head a little and wonder if customer retention is supposed to be so complex.
Well, it doesn’t have to.
63% of B2B commerce businesses told Adobe in their 2023 B2B Commerce Growth Strategies Survey that they were putting greater emphasis on building strong customer experiences through better personalization (amongst other things) – a sign that companies have started recognizing the impact of personalization on customer loyalty. Yet, if you’re focusing only on building lovable product experiences, you’re doing personalization wrong.
At Chargebee Retention by focusing on personalized retention offers, we have been able to prevent on average 23% of customers from canceling. Some marquee businesses, from Motive, to Pret, to Vital Proteins, and pliability, frequently use our solution to enhance their retention strategies by bringing it closer to their customers’ apparent needs and plugging the gaps that might sour each relationship.
Read on as we take lessons from their playbooks and our market research to uncover the high-performing personalization offers that changed their businesses for the better.
Personalized retention offers for B2B businesses.
Many vendors operate on the convention that if you keep selling a product/service that solves your customers’ problem fastest and at an optimal WTP, you will continue to attract and retain more users and hold your competitive delta.
How traditional buying decisions typically work in B2B/SaaS
However, Bain & Co. states that there are as many as 40+ value drivers (key considerations) that might influence purchase decisions. Add to that the complexity of having multiple stakeholders/approvers, and the influence of external stimuli (e.g. market conditions, competitive landscape, customer lifecycle).
Great retention, therefore, isn’t as straightforward as serving customers effectively and at the least cost to them. Therefore, great retention strategies aren’t as straightforward as serving customers effectively and at the least cost to them. If your customer decided to terminate their relationship with you, it might not be because of a price mismatch or that you don’t have enough bells and whistles, it is probably, despite them.
Consider being more empathetic than offering a blanket coupon at times like these. Here’s how ‘offer personalization’ helps:
Plan changes
Let’s say you’re a CRM that charges $1,000/year for up to 1,000 contacts, and a rapidly scaling customer outgrows that limit. Would you penalize their growth by continuing to cap their contacts or offer them the opportunity to upgrade to your $1,500 plan with 2,000 contacts?
On the other hand, a customer who is going through a rough patch and can’t keep up with your middle-tier plan can be more empathetically handled than being shown the door. Try offering them a downgrade to a cheaper plan that doesn’t have some of the bells and whistles they weren’t using anyway.
Plan changes are a great way to capitalize on changing customer requirements without impacting your pricing integrity. It allows your customers to scale up/down as per their needs and allows you to provide them only as much value as they are willing to pay.
It avoids a save-at-all-costs mentality.
After A/B testing their retention offers, sales, and marketing software – ClickFunnels – realized that downgrades and pauses commanded the highest performance. Instead of randomized retention offers at the point of cancellation or presenting discounts upfront, they started leading with their top-performing offers (including downgrades) in their “loss aversion” cards even before a discount was presented.
As a result, their save rates improved by 130% over the month.
Plan changes also enable the ability to incentivize customer loyalty through upgrades. Typical upgrade scenarios are moving a customer from monthly to annual after a defined number of recurring months (exhibitors of loyalty), often at a discounted rate.
This is commonly also seen during self-serve acquisitions. Check out how Slack offers a discounted rate and incentivizes long-term customer relationships to give them enough time to find value meaningfully.
Slack effects varied pricing points for annual v/s monthly contracts
- Plan extensions
The B2B ecosystem has too many cooks (at least from the vendor’s perspective). Multiple stakeholders – implementation, development, security, and compliance teams – must get involved before the intended user can start working or effect any changes post-go-live.
Unsurprisingly, when the plan comes up for renewal (including free trial/freemium tiers), your customer says they are yet to find enough value.
This is where offering extensions adds value. In fact, with a 4-24% (low-high) acceptance rate, extensions are the best-performing offer for SaaS businesses, according to our latest study. The same study also found that the “lack of time to use the software” due to issues was the fourth-largest reason for churn amongst SaaS businesses in 2023.
Source: Chargebee Retention study
If you detect that a customer is struggling to get on board, a personalized message offering a trial extension could help them transition. The personalization message needs to accurately identify and address the customer and demonstrate how similar customers have found value over time with your business before presenting the option to extend their trial/contract with you.
- Personalized volume or commitment discounts
Everybody likes a discount, but only some deserve it. Blanket discounts can hurt your customers and business.
Related read: Discover the true value of a saved customer
It does not allow you to reward your most loyal customers disproportionately; it even incentivizes customers with the lowest LTV/ACV to seek bargain deals by clicking the cancel button. That’s why personalized cancellation offers are critical.
With Chargebee Retention, businesses (of all sizes) can create dynamic, hyper-personalized micro-journeys for canceling customers and show them distinct offers based on targeting criteria. It means you can now effectively show a new (<6 months old) customer a different (preferably lower) percentage or dollar-value discount. In contrast, your older, more loyal customers see a different discount rate at the point of cancellation.
Personalized cancel experiences with Chargebee Retention
All of this happens without needing you to scour through your data books, CRMs, or previous customer invoices to find out who must be offered what. Just set your targeting variables (target by ACV, age of relationship, LTV, or more), connect your CRMs and subscription billing platform with Chargebee Retention, and watch everything fall into place automatically.
Personalized retention offers for D2C/eCommerce businesses.
Churn motivations for D2C or eCommerce businesses vary significantly from B2B businesses. Since the prospecting-to-conversion cycle is shorter here, the velocity and frequency of purchase-based experimentation are higher.
D2C transactions must focus more on unit economics and an immediate time-to-value since the customer first obtains the product. It’s why most businesses and customers emphasize monetization offers – i.e., discounts.
Here are some of the top-performing offers for eCommerce and D2C businesses:
Source: The Complete Customer Retention Guide for eCommerce Businesses
| ? Refresher: Discounts have two significant downside impacts on your business: They impact pricing integrity. If customers can’t respect your pricing going forward, it also impacts your value as a brand. They impact margins. Serving a customer requires operational expenses. By committing to giving customers a discount, you are impacting the margin you would otherwise have made on a sale. |
Since we’ve already discussed discount personalization and why discounts always come at a cost, here are a few other significant retention offers that many of our D2C customers use and continue to see success with.
- Subscription pauses/skips
In their survey of digital entertainment and fitness service subscribers, global insights company SKIM found that one in every ten customers cancels their subscription because they can’t pause it. 72% of them considered these subscriptions to be discretionary spending.
This is true for any other discretionary D2C/eCommerce business. Giving customers the ability to pause subscriptions is a chance for your eCommerce business to empathize with their changing circumstances and enable reconversion when they are ready to use your subscription.
And in an era where acquisitions are only getting more expensive, it offers an intelligent way to avoid the marketing costs required to win customers back later.
Skips are a similar way to withhold product/service delivery (thereby saving operational costs) while still keeping your customers engaged as active subscribers.
Chargebee Retention customers typically use exit surveys and set up rules around retention offers to inform when/if subscription pauses/skips are the ideal retention offers. When a customer actively indicates their preference to deactivate temporarily or suggests they might want to skip their next delivery, offer rules are triggered to show pause/skip as the preferred option before being presented with a discount.
- Value exhibitors on exit
Since each customer has distinct expectations and experiences with your product/service, throwing out a static cancel page is a great disservice to a relationship you can still mend.
When you explain what each customer will lose out on right when they are heading to terminate their relationship with you, it forces them to rethink their decision. Your cancel page experience, therefore, is the stitch in time that can often build loyalty.
Chargebee Retention enables this by extracting data from your subscription management platform and layering it up with machine learning. As a result, every individual customer sees a cancel page with fully customizable messaging, their usage and benefits accrued so far, and cards highlighting any accompanying offer.
Chargebee Retention connects with your subscription billing platform to offer complete cancel page personalization
“I love how easy it is to configure elements in Chargebee Retention – change branding elements or even offers without reaching out to Customer Success or anyone else. Building a retention strategy with Chargebee instantly saw a decrease in our churn rate.”
Stefano Scalia, Head of Growth [pliability].
Leading customer loyalty through iteration and technology
As external stimuli change, the optics of the value of your customers and, subsequently, your retention offers must change with it. Proactiveness and preparedness play a significant role in determining the outcomes of your retention strategy. Saving subscribers allows you to learn, optimize, and grow with more subscribers.
Saving a subscriber early in the process allows you a bigger pool of subscribers to test, learn, and optimize with.
Hence, in the spirit of agility and preparedness, you must continue to conduct retention experiments. Build A/B tests with randomized groups to determine what offers stick best, or add another layer of science by segregating customers based on business attributes (ACV, tenure, number of products subscribed to, or more).
The results can help you move beyond the general analytics around customer save or deflect rates. They give you a complete picture of how much value each retention offer brings to your business and helps identify the most successful offers in individual customer segments.
The same principles were applied by Vital Proteins when they built out multivariate retention testing to understand how canceling customers reacted to different retention offers and cancel experiences.
Testing customer retention offers with different audience segments with Chargebee Retention
Optimization on their top-performing offers helped Vital Proteins double their save rates and become one of the most dominant health and wellness brands in the U.S.
By staying closer to their customers’ pulse, businesses can generate improvements and build brand and customer loyalty like never before. All it takes is to think customer-first and invest in the right technology partner that helps you create personalized cancel experiences, experiment with myriad offers and combinations, and ultimately dashboard the impact on your business.
51% of subscription businesses tell us they will invest more in technology, while 32% believe they will increase their expenditure on improving retention.
Source: The State of Subscription Businesses Report [2023]
If you’re also looking for a partner to automate retention personalization at scale, or you’re looking to learn more about how top businesses (across SaaS and D2C) are leveraging technology to improve their retention strategy –
