Report: Key to SMB advertiser retention is onboarding engagement and early upselling

Customer retention is a persistent and vexing problem for many companies that serve the small and medium-size business (SMB) market. But enterprise software company Vendasta thinks that it has found a formula of sorts to combat SMB churn.

The company serves a range of media companies (e.g., newspapers) and agencies that in turn cater to SMB advertisers. The report is based on an extensive analysis of its media and agency customers’ SMB customers, roughly 100,000 being served on its platform.

Here’s the most essential formulation of that approach:

• Use a needs-based sales approach.
• Upsell SMBs within three months of onboarding (based on actual needs).
• Engage early in the relationship to activate the customer and maximize retention.
• Sell multiple products — four is better than one.
• Verticalize sales and solutions.

As an illustration of the effectiveness of “needs-based selling,” Vendasta says that 47 percent of SMBs with a below-average social media presence, who were not sold a corrective product, remained customers at the two-year mark. But 78 percent of those sold a solution were retained.

This example makes the second point as well: Selling more to SMBs, provided the products address actual needs, increases retention. Vendasta says that selling should happen within the first three months: “Upselling at the three month mark makes the greatest difference on client retention over time, showing a 20% increase. Re-evaluating the results of your initial solutions and adding additional value early on appears to promote a healthier, longer relationship.”

Early contact during and after customer onboarding can improve engagement, which also leads to retention. Specifically, “Getting clients to engage five times within the first month of service was found to have the greatest impact on increasing retention” — by 20 percent.

SMBs who bought multiple products were more likely to be retained than those buying a single product. After two years, SMB retention was positively correlated with the number of products sold:

• 30 percent — 1 product
• 48 percent — 2 products
• 50 percent — 3 products
• 78 percent — 4 products

In other words, 78 percent of SMB customers buying four products were retained at the two-year mark versus only 30 percent of those buying a single product from the marketing partner.

The final argument is that vertically specific products and sales are stronger and better for retention than a more horizontal or generic approach. Vertical tactics boosted retention by 15 percent at the two-year mark compared with those providers using a more one-size-fits-all strategy.

Some of this is common sense. But much of this advice represents the cumulative wisdom of years of trial and error on the part of many SMB aggregators and marketing services providers. Yet translating these insights into actual customer retention remains a significant execution challenge.