Great customer service delivers real business value. That’s a foundational belief at Help Scout, as outlined in our support-driven growth articles.
Even so, it can be difficult for empathetic customer service staff to think about customers in terms of business revenue. It somehow feels more “fair” to treat every customer equally, being helpful and responsive without regard to the money involved.
In this article, we discuss the role of support teams in retaining customers and show how to combine high-quality, empathetic customer service with a deliberate focus on business growth.
What is customer retention and how is it measured?
For a person to become your customer, they need to engage with your products or services at least once. Customer retention, then, is all the work you do to keep that customer coming back again and again. The simplest way to calculate it is as follows:
Say you have 500 customers on March 1. Throughout March, you sign up 100 new customers, and on March 31st you have 580 customers. Plugging these numbers in to the formula, we get:
(580-100)/500 x 100 = 96% retention
For a subscription business, this is a clear and simple metric. If customers continue paying their regular subscription, they are considered retained. For other types of businesses without regular billing cycles, retention might be measured in other ways.
For example: You can look at repeat purchase rate, which measures how many customers come back after their initial purchase (even though it may not be for months or years). You may also look at the percentage of revenue you retain from your customers, which can show customers who are still returning but are spending in larger or smaller amounts than before.
Read What Is Customer Retention + 16 Proven Retention Strategies for a broader look at customer retention. However you measure it, the evidence is clear: Keeping the customers you already have costs much less than finding new customers.
Why customer service teams should care about retention
The obvious answer is that you only need a customer service team as long as there are customers to service. If the company fails to retain enough customers, it will struggle to grow and may need to lose staff.
The deeper truth is that excellent customer service is more than just being helpful and accurate in answering questions. Your customers buy your products and services because they want to reach some particular goal. That might be solving a business problem, addressing a personal need, or even creating a feeling.
Customer retention is a good proxy for answering the question, “Are our customers getting value from spending their money on our products?”
It’s crucial to note that the reasons a customer chooses to stay or leave go beyond their customer service interactions. Product quality, pricing, competition, the work of marketing and sales teams, and economic conditions all play a role.
It’s important to have a realistic understanding of where customer service teams make a difference to retention rates — and some ways to measure how well they are doing it.
Measuring the impact of customer service on retention rates
Understanding the precise impact of customer service teams on retention is difficult. The best approach is to combine several quantitative and qualitative measures.
1. Correlate customer service contact and retention rates
Are customers who work directly with your support team significantly more likely to repurchase or continue a subscription than those who do not contact support?
If they are (and in my own past experience, I was able to confirm that with the company data analysts), then you can look at some specific interactions and build a picture of how those conversations might be contributing to retention.
You could do the same analysis for people who are NPS promoters: Have they contacted customer service more frequently than your detractors?
2. Review “lost customer” feedback
When a customer fails to renew their business, ask them why. The stated reason can point to the role of customer service. That may be a poor service experience or perhaps a misunderstanding of the product that could have been resolved by contacting support.
3. Read external review sites
Review sites like G2 and Capterra provide plenty of qualitative commentary, both good and bad, on why people choose to use certain products. Look for recurring themes in the way customers describe their service experiences.
4. Report on “saved customers”
Customer service teams do a lot of work that is invisible to the rest of the company. When a frustrated customer demands a refund, wants to close their account, or expresses disappointment with a product, a great customer service rep can often turn it around with a helpful answer, effective listening, and thoughtful questions.
Tag those cases so you can report on the recurring revenue that was saved — and so you can teach the rest of the team how to do the same.
15 practical ways customer service teams can improve retention
To improve customer retention, first you must understand why your customers leave, and then how your customer service team can positively impact those reasons. To discover why customers are leaving, start by talking to the following folks:
- Your customer success team or account managers, if you have them.
- Your sales team.
- Your finance team, who may be involved with larger account billing.
- Your existing support team.
- The customer feedback and reviews mentioned in the previous sections.
In conjunction with the specific reasons your company finds that customers leave, here are some specific areas to consider working on.
1. Don’t make it worse
Research consistently shows that customers leave businesses because of poor service. The first and most critical role of a customer service team is to deliver consistent, quality service to their customers. Check out our free, six-part video course, Foundations of Great Service, for helpful advice on giving better service.
2. Know the numbers
Find an ally in your finance or business analysis team who can help you understand the numbers that drive your business.
Knowing which customers are most valuable and understanding the buying cycle and how product usage correlates to retention will help customer service teams focus their efforts and be more effective customer advocates.
3. Help customers onboard quickly
There can be a long gap between the new customer’s sign-up and when they begin receiving the value that your marketing or sales might have promised them.
Customer service teams can help bridge the gap by explaining features, suggesting optimizations, or spotting problems and guiding customers through those steps as they increase their skills.
4. Be curious and ask good questions
Customers tend to ask for what they think they need, but that’s not necessarily what will help them really succeed. A curious support team asks insightful questions, understands the customer’s true goals, and then gives them more useful answers.
It may mean longer conversations upfront, but it will lead to a better long-term customer experience.
5. Develop analytical reading skills
Not every customer can communicate clearly in writing. Effective customer service teams can read analytically, uncovering information beyond the surface level. Learn more in Why Analytical Reading Is a Must-Have Skill.
6. Practice good recovery skills
A customer who experiences a problem but is happy with how it is resolved is more loyal than a customer who never experienced a problem at all. When something goes wrong, your customer service team has a chance to create a loyal customer.
7. Answer, anticipate, elaborate
Train your team to go beyond answering what was asked by using this three-part model:
- Answer: Give the customer what they asked for.
- Anticipate: Think about what question they are most likely to ask next, and answer that one, too.
- Elaborate: Share a help document, a video, or other contextual information that might help the customer continue their work without needing to come back and ask again.
8. Watch for signs of distress
Customer service can often detect the earliest signs of potential customer churn. Train your team to watch for signals (such as requests to export data or questions about billing options) and flag them with account managers or leadership so early intervention can happen.
9. Record and share customer insights
No team has more direct contact with customers than the support team, but too often they are isolated from the rest of the company.
Help your team collect, organize, and share information about how customers use your products, the language they use, their frustrations, and their requests. That information should help shape product changes and drive retention in the long term.
10. Build stronger relationships
Customers do business with people they like. Encourage your team to add some personality to their conversations. Sharing pet stories, mentioning a TV show, suggesting a good external product — the sort of casual chat that makes real-world business interactions more enjoyable.
Just be sure to use good judgement as to when chatting is appropriate and when to stick to business.
11. Help customers navigate
Every product or service has some rough edges and limitations, but a good customer service team can help customers work around them and get the job done. Sharing some alternate paths can make the difference between a customer who gets stuck and leaves and one who becomes an effective advocate.
12. Respond to feedback
Keep customers connected by following up on past issues. Let them know when a bug is fixed or a product feature is added. Read more ideas in Track Requests to Keep Customers Coming Back.
13. Educate while answering
Customer service teams should not be purely reactive. Creating and sharing knowledge base articles, webinars, video guides, and product walkthroughs helps people before they even know what to ask.
14. Reduce customer effort
Customer effort is an important leading indicator for customer churn (and retention). Customer service teams can directly reduce that effort by improving responsiveness and self-service options.
15. Advocate for customer-friendly changes
Many customer retention improvements need to come from the broader business, but customer service can play a role in identifying and advocating for those changes. For example, clearer pricing models, more generous refund policies, and product micro-copy improvements can all make it more likely that customers will stick around.
Make sure the business understands those issues and their potential impact by sharing examples and quantitative data collected directly from customers.
When customer retention is a mistake
Not every customer should remain your customer. There are times when the most helpful thing you can do is suggest that a customer should use an alternate product. Here are a few examples:
- You provide a product or service which requires a level of knowledge or skill that the customer just does not have access to (think API tools being used by someone without any development knowledge).
- The customer wants to use your product for something very different than what it was designed for. That is a recipe for endless customer frustration and irrelevant feature requests.
- When a customer insists on being abusive to your customer service team, even after warnings. The money they pay should never be a license for abuse.
A customer who is a poor fit for your business is very likely to churn anyway — it’s far better to be honest with them and to give your best suggestion for a better solution than to let them struggle through and eventually leave frustrated and angry.
A customer who leaves feeling good is more likely to return when their situation changes.
Customer retention is a natural byproduct of great service
The best customer service teams have a broad view of their role. They think beyond doing a good job answering individual questions, knowing that their ultimate job is to understand their customers’ goals and help them to succeed.
With that perspective (and in a business which affords them the time, training, and support to act on it), customer service can be a driver of business growth, delivering more value to the customers and to the business, while making their own jobs more enjoyable.