Customers

4 Ways Customer Onboarding Is the Secret to Startup Success

4 Ways Customer Onboarding Is the Secret to Startup Success
Image credit: Clueless | Paramount Studios

In a nutshell, customer onboarding is about introducing new customers to your business by showing them the services available and ensuring their experience is as simple and streamlined as possible. It has long been considered a business best-practice -- but many don’t understand its real value. For startups in particular, strong customer onboarding is a secret to success.

Related: 5 Simple Ways to Reach Customers

1. Encourage positive experiences.

Customer onboarding primarily involves answering customers’ questions and addressing their concerns so they have a smooth, positive experience with your product or service. The best startups use customer onboarding tactics that streamline the experience and impress consumers with their ease and usability. Failure to do so may give customers a negative impression -- and they may leave altogether:

 

 

Poor customer service dwarves the other reasons customers leave, as this infographic from Kapow shows.

2. Get to know your customer.

Back in the days when traditional marketing dominated, customers weren’t clicks. Understanding customers and their needs were important lessons for inbound marketers. Customer satisfaction surveys, for example, are a great way to learn how well consumers responded to your products and services. The tactic is important for any business --  83 percent of those who call themselves successful actively measure customer satisfaction.

Startups, however, are in the nascent stages of discovering their audience and catering to their needs. For these businesses in particular, getting feedback from consumer experiences that can guide future adjustments in products and marketing strategies is essential. Gathering records on clients will also help you have better insight into the products and services that would appeal most to customers.

Related: 13 Tricks for Landing Your First Thousand Customers

3. Increase retention.

Customer onboarding tactics such as conducting needs assessments, offering assistance, following up with customers, and offering them a custom experience can be powerful strategies to increase retention. Research in the Harvard Business Review found that businesses don’t increase customer loyalty by delighting them -- but by finding ways to reduce their effort.

Still, most businesses consider generating leads and converting them to be their top priority instead. For inbound marketers, getting to these new leads is considerably more important than gaining more revenue from existing customers, as shown in Hubspot’s State of Inbound 2015 Report.

The gap in priority is actually pretty strange, considering the value of retention compared to acquisition.

  • Higher retention equals more profits: Research from the Harvard Business school found that a 5-percent increase in customer retention leads to more than a 25-percent increase in profits.
  • Retention is cheaper than acquisition: An Econsultancy survey found that 82 percent of companies agree that retention is cheaper than acquisition. For some markets, retention is essential for getting any return on investment (ROI) at all. Research by Bain & Company found that online apparel retailers need to retain customers for at least 12 months in order to break even on the investment:

 
  • Repeat customers spend more: Repeat customers also are the key to revenue. Adobe's research found that returning purchasers generate three times higher revenue per visit than first time shoppers.
 

 

At the same time, nearly 75 percent of all cross-sell opportunities occur within the first 90 days, making customer onboarding an essential tool for revenue generation.

  • Repeat customers bring new leads: Repeat customers who are satisfied with a business can act as influencers that help bring in other leads organically. At the same time, dissatisfied customers are more than twice as likely to tell others about their negative experiences, which will draw leads away, as shown in this Kapow infographic:
 

4. Customer onboarding drives startup success.

A certain amount of churn is inevitable for any business, which is why many continue to focus most of their energy on acquisition, replacing dissatisfied customers with new leads.

For startups, this can seem like a viable strategy in the early years. But in the long run, it can become devastating. David Skok put together sample pie charts on ForEntrepreneurs:

 

In this example, a SaaS (software-as-a-service) startup in year three is losing $3 million to churn, which can easily be replaced by new bookings. The company expands, and by year sxi, the amount lost due to churn increases to $30 million. At this point in the company’s growth, it would be nearly impossible to replace that much revenue with new bookings.

A lot of startups are good at hypergrowth. But in order to succeed long term, they need to combine hypergrowth with tactics (like customer onboarding) that reduce churn -- otherwise eventually, the churn rate becomes greater than the potential leads to replace them.

How do you think customer onboarding drives startup success? Share your thoughts in the comments below.

Related: 5 Customer Acquisition Mistakes You Can't Afford to Make