In the competitive business landscape, customer loyalty is worth more than its weight in gold. Equally important to attracting new customers, the ability to retain existing customers is essential for any company's growth and profitability. One critical– but all too often overlooked– aspect that significantly impacts customer retention rates, is the digital authentication and verification process.
When existing customers forget their passwords or usernames, the inconvenience of resetting their credentials puts customer loyalty to the test, often driving away even the most loyal customer into the hands of a competitor. Resetting a password via OTP (one-time password) is often just as time-consuming and frustrating as creating a new account elsewhere.
Customer churn caused by passwords and other legacy digital identity methods decreases the average customer lifetime value and increases churn rates, sometimes referred to as attrition rates, hurting a business’s top line.
In this blog, we will explore the impact of passwords on customer retention, discuss customer retention strategies, and explain how passwordless authentication can improve customer experience and expand your customer base.
In today's digital age, customers are juggling an ever-growing number of online accounts, ranging from e-commerce sites, social media platforms, and healthcare sites. No wonder why it’s so difficult for existing customers and new customers alike to remember all their passwords and usernames, especially considering how often they must reset them for security purposes.
When existing customers encounter difficulties in recovering their accounts, frustration follows, and their loyalty to the service provider may be put at risk. As the customer retention rate declines, the company faces the challenge of replacing lost customers with new ones through costly customer acquisition efforts. Without repeat customers, a business struggles to survive. Long story, short: poor digital identity can drive away even happy customers and put a business in jeopardy.
So what steps must you take to boost your customer retention rate?
Before improving the customer retention rate, you must first establish a baseline. The customer retention rate is a vital metric that measures the percentage of existing customers who continue using a company's services over a specific period versus the customers who drop off. The higher the customer retention rate, the better. By monitoring this metric, businesses can flag issues in the customer experience and take proactive measures to retain a greater number of customers.
After you track the customer retention rate for a set period to establish a baseline, it’s time to implement new customer retention strategies. One innovative solution to improve your customer retention rate and enhance customer loyalty is by leveraging passwordless authentication. Here's how it can revolutionize the customer experience:
1. Seamless Access: Passwordless authentication eliminates the need for customers to remember and manage passwords, streamlining the login process. By reducing friction during authentication, existing customers can access their accounts quickly and without effort. In today’s fast-paced world where distractions are everywhere, easy log-ins are a great way to meet your customers’ needs. By eliminating the password, banks and fintech companies can now offer the seamless experience customers already enjoy on e-commerce sites.
2. Strengthening Security: Passwords aren’t just a pain to remember. They’re also extremely vulnerable to fraudsters. Even hard-to-guess passwords can be stolen during data breaches and sold on the dark web. Passwordless authentication utilizes advanced security measures including tokens, making it more difficult for fraudsters to break into accounts. The improved security instills confidence in customers, increasing their trust in the service provider and can boost customer satisfaction.
3. Enhancing Customer Retention: With passwordless authentication in place, the chances of customers switching to competitors due to forgotten passwords decrease significantly. By removing this common frustration, businesses can boost customer retention rates and nurture long-term loyalty. The easier a customer can access their account, the more likely they will become a loyal customer.
If you're still relying on legacy technologies like one-time passwords, you are adding a dangerous amount of friction to the customer journey, putting unnecessary strain on your customer support team, and depressing your customer retention metrics.
Today, the best customer support is often invisible. Allowing customers to access your services without dealing with passwords and OTPs delights customers and fosters customer loyalty.
Passwords and OTPs present a sub-optimal experience for customers and at the same time, are vulnerable to social engineering and other fraud vectors. If you’ve ever felt like pulling your hair out because you couldn’t remember your password or because you were waiting for a one-time passcode that never arrived, you are in good company.
A recent survey Prove conducted with OnePoll found that 62% of consumers said they’d abandon trying to log into an account after just three failed password attempts and 34% would switch providers completely if they’re unable to log into their account easily. Passwords are putting brand loyalty to the test, causing even happy customers to switch to competitors.
From a security perspective, a staggering 81% of hacking-related breaches used stolen passwords and/or weak passwords, demonstrating that passwords are far from effective when it comes to preventing unauthorized users from accessing accounts.
Password resets & OTPs also cost firms millions annually. Given that a single password reset done via a support team can cost around $7, many firms are looking for a more cost-effective and user-friendly approach to authenticating identities.
Based on customer feedback, many leading companies are choosing to go passwordless by adopting more advanced and accurate identity authentication solutions such as deterministic authentication through a mobile device. Deterministic authentication through a cryptographic key such as a SIM card on a mobile device has many benefits:
Simply put, identity authentication that leverages mobile signals is more secure because it requires a user to be in possession of their mobile device. Unlike passwords and OTPs, which hackers can easily access, this “possession check” makes fraud unscalable and costly for fraudsters. Deterministic authentication through mobile signals is also inherently more user-friendly because it uses mobile phones, which most people always have close to them.
Prove Auth™ is a next-generation solution for passwordless login and omnichannel authentication. Prove Auth™ enables companies to reduce reliance on passwords and one-time passcodes (OTPs) and empowers consumers to frictionlessly authenticate from any channel with a 1-tap solution that is simple, cost-effective, and secure.
Prove Auth™ leverages the cryptographic key that is in a mobile device to authenticate consumers more accurately because it performs a “possession check” that requires a user to be in possession of their mobile device. This means that fraudsters will not be able to pass this check unless they are physically in possession of a consumer’s device (which is possible but is unscalable and typically not worth a fraudster’s time or effort).
Prove Auth™ also elegantly uses something that most adults already have in their possession at nearly all times - their mobile phones. Because most consumers are already accustomed to using their mobile phones, there is no learning curve for your customers to overcome. However, unlike OTPs (which also use mobile phones and customer input), Prove’s services allow companies and consumers to develop a high level of trust in the use of the phone number or any other user id as an authenticator for a particular transaction. Prove Auth™ allows the device itself to inherit that trust by establishing a bind or key between the device and a given identity. After the initial bind, the key can then be used in place of traditional, phone number-based authenticators for the user to prove possession.
Many companies have found that the most successful customer retention program is improving their digital identity practices to reduce friction. What better way to keep customers happy than making common events like digital onboarding and log-ins a breeze? Here are a few customer real-life stories of companies that made the jump to passwordless:
After developing an onboarding process that does not rely on the creation of easy-to-forget passwords and usernames, you can take additional steps to ensure satisfied customers return for repeat business. This will give you ample opportunity to both upsell and cross-sell, increasing revenue.
1. Personalized Customer Experience: Tailoring the customer experience to individual preferences and needs can significantly impact customer loyalty. Utilize data-driven insights to understand customer behavior, preferences, and pain points, delivering personalized experiences that build strong emotional connections with the brand.
The days when a personalized experience simply meant sending a generic email with an individual customer’s name in it are over. Today, companies are leveraging the latest in AI technology to enhance customers’ experiences. Here are some tips to delight existing customers through personalization:
2. Proactive Customer Support: Implement proactive customer support by using AI-powered chatbots to answer simple but common questions while leveraging your real-life support team to solve the more complex questions. By going passwordless, you can also free up your real-life customer support team from dealing with password reset questions which can take up a lot of time. Pro tip: Because customers are frequently reaching out to companies for support on social media, be sure to stay active on Facebook, Twitter, and Threads.
3. Customer Loyalty Programs: Introduce loyalty programs that reward current customers for their continued engagement. Offering exclusive discounts, rewards for repeat purchases and referrals, or early access to new products can incentivize existing customers to remain loyal and discourage them from switching to competitors. Unfortunately, many companies based in India outsource the running of loyalty programs to third-party companies that rely on passwords. Be sure to avoid this mistake. Creating customer loyalty programs is a smart marketing strategy leveraged by all of the top brands. Pro tip: a great loyalty program with generous offers can spread fast via word-of-mouth and referrals.
4. Frequent Engagement: Maintain regular communication with existing customers through personalized emails from brand ambassadors, social media, or relevant content designed to cross-sell. Staying engaged with customers keeps the brand at the forefront of their minds, increasing the likelihood of continued usage.
Maintaining positive customer relationships is vital for sustainable business growth and success. In today’s digital world, customer engagement relies on easy and secure access to online accounts. If a company leverages legacy technology like passwords and OTPs, it will fail to meet the customer’s expectations, resulting in greater churn and a smaller total number of customers.
It’s important to note that password-related issues on existing customers can significantly influence their loyalty and ultimately affect the bottom line. By implementing customer retention strategies that prioritize smart digital identity practices, personalized experiences, proactive support, loyalty programs, and constant engagement, businesses can delight existing customers and earn rave reviews in testimonials.
Passwordless authentication emerges as a game-changing solution, offering seamless access, strengthened security, positive customer perception, and enhanced customer retention. Embracing passwordless authentication not only improves the overall customer experience but also contributes to building a loyal customer base. As businesses prioritize the needs and preferences of their existing customers, they position themselves for long-term success in the ever-evolving digital landscape. So what are you waiting for? It’s time to lose the password and win new business.
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