One statistic business owners hear repeatedly is this:
The cost of acquiring a new client is five times more than retaining an existing customer.
Experts suggest the differential may be significantly higher when complex and long sales cycles are involved, and the typical IT services transaction certainly fits that description. All the emphasis and repetition involving client retention highlights the value to business owners, and why those efforts are front and center in the MSP community.
Client loyalty is critical for driving incremental MRR and profitability. Returning customers are typically successful businesses that will require more licenses, devices, solutions, and support services each year. In addition to organic growth, profitable organizations today tend to invest more capital in innovation and enablement tools for their employees. The higher MSP customer retention rates, the more opportunities those firms will have to generate additional MRR.
Even a minimal investment in this area can help. Studies show that when businesses increase spending on these activities by just 5%, their profits can go up between 25% to 95%! What small things could you do to improve your MSP/s client retention rate and enjoy that level of margin growth?
The great news for IT services firms is that businesses’ increasing need for technological improvement tends to increase their reliance on quality providers. If you and your team do your job well, your MSP’s client retention rates will generally be high.
Understanding how your business can improve client retention is not some unknowable secret. In this piece, we’ll examine the top strategies for maintaining long and healthy relationships with your clients.
Eliminate the roadblocks
Before we begin, it is important to remember there are several factors that can challenge a customer’s loyalty. Even when IT service firms provide top-notch support and relationships are solid, the competition will be working to undercut them on price or get their foot in the door with a unique solution or support program.
Telecoms and copier dealers are perfect examples. Many of these companies also offer managed services and target MSPs with low client retention rates. Phone and copier services help them get a foot in the door with new customers before they start working to displace their rivals from the account. Boosting customer satisfaction and MSP customer retention rates prevents those predatory practices from succeeding.
Quality service trumps discounts. When customers are happy, most of the obstacles that affect MSP’s client retention rates fade away. The best way to overcome potential roadblocks is to focus on what people care most about, including top-notch support, IT expertise and vision, and a commitment to business best practices.
Steps to boost your MSP client retention rate
The success rate for selling additional services to an existing client is 60-70%, while your chances of landing new clients run between 5% and 20%. Relationships make all the difference. Developing rapport and trust with customers makes it easier to communicate and fosters a deeper engagement.
The more you know about each other, the greater the opportunity to boost your MSP’s client retention rate. Trust is the key to quality engagements. But what can an IT services firm do to bolster these long-term relationships?
Here are eight focal points for strengthening MSP client retention rates:
#1 Set realistic expectations
Start with the time-tested standard of under-promising and over-delivering. When your clients anticipate a certain level of services, your team must at least meet, if not exceed, those expectations. Falling short in any area will undermine trust and could negatively affect a managed service provider’s client retention rate.
#2 Build trusting relationships
Good clients are more valuable than a one-year contract. Developing friendships and professional connections with the business leaders and everyone who touches a computer or influences technology decisions is critical. Those relationships open the lines of communications and strengthen the bonds between companies. Nothing boosts an MSP’s client retention rate like forging strong bonds with the people who rely on their support.
#3 Encourage open feedback
Effective communication is just as important as solid relationships. Urge your clients to share the bad along with the good. When they bring problems and concerns to your team’s attention quickly, it gives them time to identify and implement the proper solutions. Providing an easy feedback mechanism for your clients encourages more open communications and minimizes the chances of losing key customers.
#4 Respond quickly to complaints
The longer a problem goes unaddressed, the more anxiety there is for the end-user it affects and their employer. It’s no coincidence that MSPs with high client retention rates typically focus heavily on their service levels. The faster the response for critical issues − not just the “nice to have when you get around to it” activities – the more likely their customers are to sign longer duration and larger contracts. Attention to customer service-related KPIs is one of the best ways to boost an MSP’s client retention rate.
#5 Leverage automation
Customers appreciate well-designed solutions. Providing your clients with easier ways to report issues, create support tickets, or pay their bills improves their opinion of your business. People often prefer to talk to other people, but in today’s tech-friendly environment, the advantages of automation far outweigh the disadvantages.
#6 Commit to the QBR process
Embrace your time with decision-makers. QBRs provide MSPs with an opportunity to strengthen relationships, highlight results, sell new solutions, and overcome any concerns or objections. Avoid surprises at renewal time by committing to these valued discussions.
The more others know about your company and the complexities of IT services, the more opportunities you will have for increasing your MSP’s client retention rate. Company websites and newsletters and social media make it easy to share that valued information today.
#8 Ask for testimonials/recommendations
What’s the best way to find out what your clients think about your business? Ask them for a referral or about what they like most about your support, services, and people. Are there things they would like to improve? You’ll never know unless you ask clients their real opinions.
Additional ways to boost your client retention
There are many more ways MSP’s can boost their client retention rate than the eight options listed above. While those ideas have been time-tested by some of the most successful IT services firms in the industry, most providers regularly device other creative ways to strengthen their key business relationships.
Loyalty programs are one of the more popular and successful options. MSPs may deliver tokens (nominal cost, branded favors) or larger gifts. Taking top clients to a sporting event or hosting a party at the office are other options. The key with these programs is to be thoughtful and considerate and use caution when planning activities to prevent bruised egos or hurt feelings.
Overlooking people of influence in these programs can negatively affect an MSP’s client retention rate, especially with smaller business partners. Double-check lists and involve all your clients’ employees whenever possible.
How creative is your team? What other ideas could they generate to boost your MSP’s client retention rate? Make customer loyalty an objective for everyone and encourage employee suggestions. Investing in one or two new ideas each year could pay off in a big way come renewal time. It really doesn’t take much money or time to build and foster important relationships in both your personal life and business.
Curious if there are other ways to add valuable services for your clients? Check out the Rev program, and see how both you and your customers can earn MMR with manual recurring work.