What to Expect from Retention
By Richard Parkin
A refund request doesn’t need to result in a refund. Establishing an effective retention plan means that you can start turning some of those requests into long-term, satisfied customers, often with little to no loss on your part.
Once fully set up, we typically target around a 15% retention rate for requested refunds, aiming to convince 15% of attempted refunds to stay on board. While this is an aspirational target rather than a baseline, it’s one that’s very much reachable.
This blog is all about retention – where (and how) to start, what you need to know, and what you should avoid at all costs.
Starting Out With Retention
Depending on what offer you want to start with, retention can be set up very quickly. On a basic level, all you need is a script for your customer support team to follow.
That script can be as simple as this, though should typically fit your product’s specifications:
“I’m sorry that you want to claim a refund for your order. We can get that processed for you, but I’d like to offer you an alternative. I can issue you a 30% refund right now, while letting you keep your purchase.”
While offering that initial discount is often one of the most effective options you can use for retention, it’s not always going to be the best way – or the best for your bottom line. Some retention offers can be completely free for you to run, while retaining a significant proportion of customers.
Depending on the client, we’ve implemented several retention strategies – offering a free set of eBooks (practically zero additional cost on your side), offering a free product with the next delivery of a retention offer (additional cost near-immediately offset by the continued retention), offering an alternative product, some free months of a service.
There’s no one approach that perfectly suits every business. Getting the best results from your retention program takes a lot of trial and error, exploring different potential options and opportunities.
How to Approach Retention
Retention virtually always has to take place through your CS agents. It needs to come across as a personal offer for the customer, not a formulaic, automatic procedure. By individually addressing the customer, you’re making it clear that they’re valued – this likely seems to be a very minor step, but it’s one that has a real effect for the buyer.
To maximize the results of your retention program, you need to understand why your customers want refunds.
You should always be taking steps to reduce those initial refund requests by improving your services – if most refund requests come from people who misunderstood a key part of your advertising, make the facts clearer, and you’ll minimize the amount of refund requests you have to deal with in the first place.
Retention is about retaining refunds from the customers who experience problems that you can’t just quickly fix. People who aren’t satisfied with your products, who think they’ve paid too much, and the like.
By working to understand the standard set of problems that result in refund requests, you’ll be in a better position to support your customers, successfully converting refunds into retained revenue without threatening your bottom line or overloading your CS team.
For high-ticket offers, retention can present some difficulties. With a relatively low number of conversions, there’s less room for experimentation, while certain retention offers aren’t going to result in anything but frustration.
As such, high-end retention typically needs to be a lot more offer-specific: something that complements the original purchase, not just something with a tangential connection to that initial sale.
The Problems With Refund Retention
There are a number of issues that can occur with refund retention.
As a first and immediate step, you’ll need to ensure that your retention attempts don’t lead to chargebacks. If a customer believes that they can’t get a refund, they’re likely to submit a chargeback request to their bank.
As such, your team’s messaging needs to make it absolutely clear that the customer can claim that refund: you’re offering an alternative, not cutting off the possibility of a refund.
It’s also worth considering how refunds and retention impact your CLTV (Customer LifeTime Value). If you’re calculating your CLTV without reference to your expected refund rate, you’re going to overestimate your overall revenue, and may encounter difficulties if you use the underestimated value for your calculations.
At the same time, a refund, retained or not, does not mean the end of your interactions with a customer, even if they’ve refunded your main product.
You’re still going to be able to sell to that customer – you may just need a different approach. Split test different approaches for reengaging both past refunders and successfully-retained buyers.