#15: The 3 Types of Client Retention

Many businesses misunderstand retention.
They think it's about keeping clients for the longest time.
They think it's about making people stay even if they don't want to.
They think it's about constantly upselling them to extract more money.

From what I've observed...
Most businesses treat retention in a tactical way.
They think it's about loyalty programs.
Or giving special promotions and discounts.
They think it's about CRM automations and sending email follow-up sequences.

In this post, I'll debunk all the misunderstandings.
So you get clarity about what "retention" really is about.
I'll also show you examples based on what I've experienced...
When the businesses have certain misconceptions about "retention".

Ready?
Let's dive in.

Firstly, I'll introduce you to the 3 different types of retention.

1) Forced Retention

People stay because they're bound by contractual terms.

They can't leave even if they want to, no matter how unhappy they are.

But once there's an opportunity to leave, they may do it.

2) Utility Retention

People stay because it's inconvenient to leave.

They're staying because the product or service is still useful.

They haven't found a better alternative yet.

They may leave once they see a better available option.

3) Voluntary Retention
People stay because they're happy to continue the relationship.

They stay willingly.

They don't want to leave even if they're free to do so.

No prizes for guessing which type of retention creates the happiest and the most valuable clients.

Businesses that facilitate voluntary retention will have the most loyal clients.

These loyal clients will be the best advocates.
They're the ones most likely to bring in new referrals for the business.

Remember the retention formula?
Trust + Meaning = Retention

This formula specifically describes Voluntary Retention.

In Forced and Utility Retention...
Trust may already be gone.
There may be no meaning in staying.

They're staying because they have to.
Not because they want to.
The retention formula doesn't hold in these 2 types of retention.

Different business philosophy, different retention mechanisms

In my previous posts, I've mentioned about 2 business philosophies:

People > Profits

Vs

Profits > People.

Businesses designed to prioritize profit maximization tend to utilize Forced and Utility Retention.

Scenario 1:

In the early days of my business, I hired my first coach.

I joined his group coaching program.
He promised that we would sign paying clients with the things he taught.
He said the program was essentially free.
Because the money we make from the clients will cover his coaching fees.

But it was over-promising with under-delivery.
He withheld important knowledge.

He gave us a sales script and said it could help us sign clients.
But he didn't teach how to overcome objections.

After I asked another advanced student who was helping out as an assistant coach...
I realized that "objection handling" would be covered in the advanced program.

I understood immediately.
I lost all trust in the coach.

The program was structured this way to retain students using Utility Retention:
Students would have to buy the upsell if they wanted to learn "objection handling."
The program wasn't designed to equip students with all the necessary tools to succeed.

I only stayed till the end of the program I signed up for...
Again, by utility.
I didn't know anyone else in the industry at that time.
I never purchased anything from him again.
He also didn't offer the upsell program since none of us in the group signed a client.

The moral of the story is...
The more you think about extracting money from people...
The less you think about how to serve them well.
And people can feel it.
Trust leaks eventually occur.
Then they leave quietly.
Just like I left without looking back.

Scenario 2:

I used to be under contract with a telco company for my mobile line.

When I discovered I was billed unfairly...
I was unhappy.

I called their customer service to resolve the issue.
They weren't able to help me.

Instead, they shirked responsibility.

They said it was due to my phone settings.

I called the customer service for my phone.
They said billing issues should be resolved with the telco company.
So here I was... Being kicked like a ball.
I was going here and there, wasting time.
But the issue wasn't resolved.

What did I do?
I continued my line with the telco company until my contract expired.
Because I was tied by Forced Retention.

During the time I was looking for an alternative telco company...
I still stayed with the previous one.
Because of Utility Retention.

I still needed a phone line.
But once I found an alternative...
I signed a new line with their competitor.

On the other hand...
Businesses that focus on People > Profits tend to utilize Voluntary Retention.

They focus on serving people well.
They create a great experience for the people they serve.
They make sure the needs of their audience are well taken care of.
They manage expectations well.

So people won't get disappointed unnecessarily.
People love to return and do business with them.

Key lesson
Not all retention is equal.
To have a durable and sustainable business...
You must work towards achieving Voluntary Retention.

Because they stay willingly.
They have a great experience with your business.
They're happy.
They don't want to leave even if they have a choice to.

These are your loyal client base.
They're the ones who are most likely to refer new business to you.
They're the moat of your business.

Forced Retention and Utility Retention may keep people for the short term.
But the business is still fragile.
Because people stay unwillingly.
They're looking for an exit once the opportunity presents itself.
Chances of repeat purchase and referrals are low.

By now... You know the different types of retention...

And the types of philosophy driving the businesses.

Here's a decision you have to make:
Will you rather focus on the short-term benefits of extracting maximum profits from the start?
Or would you rather build long-term relationships so they compound multiple times in the future?

- Herek