Maintaining the quality of services provided is one of the main points to ensuring customer retention in IT. But, it is not the only item to be observed so that a company that adopts MSP (Managed Service Provider) can achieve the satisfaction and loyalty of its consumers.
In turn, retention is necessary to maintain the IT managed services provider’s frequent cash flow and therefore must be pursued with a commitment by the entire team.
If you’re having trouble retaining your customers, don’t worry. We created a complete guide to help you better understand this whole process and apply it to your company. So, separate a good coffee, continue with us, and good reading!
IT customer retention
Retaining customers is yet another IT management challenge and can be conceptualized as ensuring that there is no loss of customers through different attitudes and strategies. Therefore, the purpose of a retention program is to prevent customers from canceling service.
This objective must be worked with your consumer from the first contact between the MSP and the contracting company. In this way, ensuring your satisfaction and transparency throughout the process of contracting and providing services.
However, even with the importance presented by this process, many MSPs still leave retention aside for other priorities, such as customer acquisition. This is a serious mistake that could harm your business in the future.
This is because the investments made to attract new customers will be in vain. After all, they may not be able to enjoy their services long enough for a return on acquisition costs. Thus, having a negative impact on finances.
That is, when we think from a financial point of view, it is much more effective and efficient to work on customer retention than to direct all your focus only to acquiring new agreements.
Retention versus loyalty
As much as the two terms are confusing because they are similar, their meaning is not the same. Retention differs from loyalty in that it is the first stage of it and consists only of preventing the customer from breaking an agreement.
In addition, the term withhold is much more used by companies that sell their services on a monthly subscription basis, for example, as a managed service provider does, allowing the customer to break the agreement at any time.
This is different from selling a product, where the warranty given by the manufacturer expires after some time, as provided by law or agreed between the parties. With a service, the situation is totally different. During the entire duration of the agreement, both the contracted party and the contracting party may terminate and cancel the service as they wish.
Because of this, companies such as MSPs or other more advanced service providers make constant investments in IT customer retention strategies. Therefore, seeking to prevent acquired consumers from canceling the agreement.
Retention and loyalty
However, retention is part of the customer loyalty process, which is already a more advanced stage of the relationship between contractor and contractor and should also be pursued by IT-managed service providers.
A loyal customer is one of the best marketing strategies your company can have. Once he becomes a brand propagator and believes that his services are the best in the market.
We can see the power of customer loyalty when we think of companies like Apple. Even if some of its products do not perform as well as competitors, loyal customers keep the company’s revenue. In this way, they are constantly acquiring new products, and they also strengthen the brand in the market through the spontaneous dissemination of the company and its products.
Retention and loyalty techniques
With the similarity between retention and loyalty, how to differentiate the two postures when creating a strategy to retain your customers and avoid canceling services?
Let’s imagine the following situation: one of your customers gets in touch in the morning to cancel his agreement because he is dissatisfied. At this point, the attendant seeks to avoid this action by offering him a discount.
Thus, the customer rethinks the attitude of canceling the service and changes his mind to take advantage of the advantage offered by the attendant. This is a punctual retention action, as it was put in place only to avoid losing the consumer, even at the cost of a small discount on the amount charged.
Although this is a very common strategy, especially in some sectors such as telephony and pay TV, it is not the best way out. Mainly, given that the customer’s problem and the real reason for this dissatisfaction were not understood, let alone resolved.
SALE
Now let’s think about a different situation, but still related to discounts. To seek to reduce customer evasion, you implement a discount system according to the SLA (service level agreement). Therefore, guaranteeing a discount on the amount to be paid if customer service does not follow the rules and the agreed start time.
That is, if the customer does not receive the service as agreed, the company providing IT-managed services will guarantee the discount offered in the agreement for him. This is a clear loyalty action, as it makes the contracting party feel comfortable to continue to enjoy its services for longer, with certain guarantees of constant quality.
But it is necessary to be aware: loyalty does not only lead to discounts … Your goal should be a long-term one, involving the constant quality of your services, proof of delivery through executive reports, the constant search for improvements, and adding direct value to the business. If your service is focused on your customer’s business and not just on the network, loyalty will occur naturally.
After all, loyal customers are less likely to opt for cancellation and accept to pay higher amounts for services, as they trust the company.
IT customer acquisition
Most companies, not just managed service providers, but most of their efforts into customer acquisition. This is not a wrong attitude, after all, to grow you need to sell more and conquer more markets.
But this growth requires the investment of a lot of time, money, and the movement of its employees. Therefore, it is necessary to structure the after-sales service and work on retaining these customers to prevent premature cancellation.
It is important to remember that customer loyalty begins with the first contact between your employees and the contractor. Because of this, the strategy to retain new agreements must be known to all departments of the company.
Cancellation fee
To know if your customer retention strategies are working, the main metric you should be aware of is the churn rate, also known as the churn rate. This metric displays the number of broken deals in a given time period. The main goal of customer retention is to mitigate this metric, or, in an ideal scenario, bring it to zero.
Step by step
The first step to calculating the cancellation rate is to determine the period to be analyzed. Generally, most companies choose to perform this calculation every month. Mainly, to have greater control over the rate and take corrective actions.
Next, you should check the number of customers who have canceled the services against the number of active consumers. That is, those who maintain the agreement. For example, let’s say you have a base of 20 active customers at your company today and you had 1 customer canceled. In this case, the churn rate is 5%. It might not seem like much at first, but keep in mind that this is a monthly number.
Let’s say that in a year, your churn has remained at 1 cancellation per month. Even in a scenario where there is a good customer acquisition process, conquering 20 new customers in the same period, in the end, there will be only 28 active customers.
Recalculating on an annual basis, there was a cancellation rate of over 40%. So 12 canceled customers out of a total of 28 active customers, which demonstrates how big the problem can be.
The importance of customer retention in IT
Companies that work with the provision of managed IT services should avoid cancellation as much as possible and, at this point, we can see the importance of a customer retention strategy.
Cancellations have a direct impact and pose a risk to an MSP’s revenue. The calculation of consequences of losing an agreement can vary greatly depending on the size of the client and the number of services provided to him.
A common mistake by service providers is to focus their retention efforts only on large customers and downplay the importance of small contractors. However, action must be taken to retain all consumers equally, as any cancellation has a negative impact on the company’s revenue.
Furthermore, the problem is not just limited to the loss of cash values, but also to negative marketing and market distrust. Customers who cancel are often dissatisfied with the services provided. The bad experience they had with your business will be transmitted to other companies, which may choose not to hire based on the narrative experienced by those who canceled the agreement with their business.
That is, more than money, you lose your credibility.
That’s why customer retention is so important. She must not only maintain her company’s revenue and healthy growth but also ensure her image in the market.
Customer Success
With the need to retain customers, the Customer Success methodology emerged, a retention strategy that is not based on technical support, as some people think. It is a way of seeking to align your services and solutions with the customer’s goals, thus ensuring their satisfaction, retention, and possible future loyalty to your company.
When we talk about providing technology services, we have to understand that your client’s IT success translates into growth for your company as well, as they will demand more and more services, ensuring more revenue for your business.
For this, you must focus on solving your client’s problems, understand their demands and seek to solve them in the best possible way. This is a process that starts with the sales and marketing departments. Keep your focus on your customer’s business and not just their computer network.
It is not enough just to search for any client, it is necessary to outline the ideal consumer profile so that your services could meet all expectations, which reduces the chances of cancellation or consumer dissatisfaction after hiring.
6 benefits of customer retention in IT
Customer retention emerged in service providers that maintain a subscription model due to the numerous advantages of this methodology in this environment. Let’s list some of the main ones.
1. It’s cheaper than acquiring new customers
Customer acquisition is a long process that demands a lot of investment and time from your sales team. Therefore, the costs of signing a new agreement can be quite expensive, and the amounts involved can be the same as those of a company that is already a customer.
Therefore, retaining a contractor has almost zero cost and guarantees virtually the same revenue. That way it is more interesting to avoid a cancellation than to win a new customer.
2. Ensures your company’s revenue
The main problem with monthly payments is that they can be interrupted at any time and hamper business and cash flow. A customer retention strategy is capable of maintaining an IT-managed service provider’s revenue even if it is unable to acquire new customers.
3. Improve your business image
Nothing worse for an MSP’s image than a high churn rate. This not only demonstrates a large number of dissatisfied customers but can also damage the company’s external image.
When retention is successful and there are no cancellations, leads and potential customers see it as a positive point for the company, as it is able to keep its customers satisfied with the services.
4. Maximize customer loyalty
As said, retention is the first step towards loyalty, which should be your long-term goal. However, it is only possible to retain satisfied customers with their services. Retention is a great strategy to initiate loyalty, as it is through it that your customers are shown their concern with their demands and the constant search for service improvement.
5. Improve the quality of your services
When your company starts to listen to its customers and is interested in formulating a retention strategy, it is possible to visualize all existing flaws in its processes and correct them. Therefore, we have a substantial improvement in the services and in the quality of the processes, which also demonstrates to the customers the concern to better serve them and counts points for loyalty.
6. Optimize your sales
Selling IT services to new customers is a long process that demands great work from the sales team. However, when you have a wide range of retained and satisfied customers, the path can be different: the sales team can focus on delivering new services to your customer base, thus increasing your company’s revenue with lower acquisition costs, since it is not necessary to invest in attraction.
Understand how to add value to your IT services
To retain your customers, you need to add value to IT services and ensure customer satisfaction. We’ve put together some tips to help you in this endeavor.
Know your customer
To retain a customer, you need to get to know them and understand their difficulties and needs. This goes beyond superficial knowledge or data gathered by the marketing and sales sector. It is necessary that you seek to gather in-depth information about the customer and their business, understand their goals and objectives and the role of managed IT services offered by your company in all this context.
In addition, you must always be up to date on what is happening in your client’s business and how changes can positively or negatively impact your relationship. The knowledge gained about customers will help you and your team to provide a more interesting experience to contractors and allow for a higher retention rate.
Keep close
When talking about managed IT services, we may have a problem: it is necessary to adopt a proactive and preventive posture, as problems are often avoided before they can happen. This can instill in the customer the feeling that your services are not needed or are expendable, even if your performance is primarily responsible for preventing incidents, which can lead to cancellation.
To avoid a situation like this, it is necessary to invest in proximity to the client, presenting periodic reports in order to demonstrate the actions of your team and the importance of its interventions, including quarterly face-to-face meetings.
Another point that must be sought with proximity is a relationship of trust, in which the customer feels free to point out their problems and their satisfaction with the services provided, allowing for the improvement of actions.
Customize your services
The ideal in an MSP is the creation of delivery packages that have different values and services. This allows for much better control and the guarantee of quality performance. In order to better serve customers, it may be necessary to customize some service packages, ensuring customer satisfaction and retention.
For this, it is necessary to follow one of the tips already presented: get to know the customer well, because, in order to offer personalized packages, it is necessary to understand what the real needs of the contractor are.
Remember that each company has its own particularities and what works for one client may not work for another. Because of this, you need to analyze each of your contractors before providing customized solutions.
Train your employees for retention
All the collaborators of your team must maintain a long-term vision and not a short-term one. Perhaps the hardest mindset to change is that of salespeople, who tend to only be concerned with acquiring customers.
The act of retaining a customer is the search for a relationship, which may result in business opportunities in the future, with the acquisition of new service packages and an increase in demand.
Therefore, during the entire sales funnel, from capturing leads to closing the deal, it is necessary to work with the customer for the long term and for their satisfaction, not to mention closing an agreement as to the end of a cycle. , but as the beginning of a new and more important one.
In addition, the sales team and the marketing team should focus their efforts, mainly, on leads and potential customers that meet the standards of the profile of their ideal contractor, as it will be much easier to retain them in the first moment and retain them in the long term.
Offer quality services
One of the main reasons for the cancellation is customer dissatisfaction and this is often linked to the lack of quality of services provided. To add value to your actions, you need to invest in improving your processes.
This can be done through training, acquisition of specific software for the provision of managed IT services, process remodeling, and several other attitudes.
However, the central point to ensuring the quality of your services is listening to what your customers have to say. Even if you can’t avoid a cancellation, try to understand what motivated this customer’s attitude and make changes to your services to avoid a repeat of the situation.
Learn how to create new opportunities with existing customers
Customer retention generates new service opportunities. That’s because a client may have contracted the most basic model offered by your company, but, over time, they may have gained confidence in their work and opted for a more robust agreement.
To generate this type of opportunity, your sales team should not finish analyzing the customer when closing a deal, but keep a close eye on the contractor in search of other needs presented by him. That way, whenever new demand is discovered, your sales team can initiate a proposal that is much more likely to be accepted by an active customer than a lead.
Customer retention in IT plays a key role in an MSP’s success and revenue growth, as well as healthy, scalable growth. We hope that, by the end of this guide, you may have understood the importance of investing in this process.
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