January 23, 2015

Five Levers of Customer Retention

(Originally published on LinkedIn Pulse)

Every marketer knows the adages and has heard the numbers: acquiring customers is more expensive than retaining them.

  • It costs 7 times more to attract new customers than it does to retain existing ones (Bain and Co).
  • Repeat customers spend 67% more than a new customer (Manta.com).
  • Increasing customer retention by even 5% can increase profits between 25-95% (Harvard Business School).
  • And yet, 70% of CMOs did not recently list retention as a top priority (Forrester).

There is a certain rationale behind this. For starters, there's really no such thing as 100% retention. (If nothing else, all of today's customers will be dead within 100 years!) Without a rate of acquisition that beats the rate of attrition, your customer base will shrink to nothing at some point in time!

And then there's the competition: the need to win a sustainable market share. If you're not acquiring the new customers in your market, someone else is. And each customer they acquire makes it harder for you.

You have to keep acquiring.

This reality, though, doesn't diminish the value of retaining customers and capturing more of their life-time value potential. In fact, it highlights the need for more, better retention efforts.

Retention is multi-dimensional; runs across interactions; spans digital and live; includes pre-sales, buying, and support; and should leverage both the practical and the emotional. Here are five levers to pull when integrating Retention Marketing into your business model.

Communication (Duh!)

Okay, communication has to be part of customer retention. But any old irrelevant, off-target blather won't do. What you say, how you say it, and when you say it all matter. These principles and practices need to permeate all your communication.

Optimize timing: this works in layers--where is an individual is in their life cycle, in their current buying cycle? What's the right cadence, day of the week and time of day for them? You'll want to use automation software and predictive analytics to manage and optimize timing on a one-to-one level.

Strike a chord: people listen and engage when they feel an affinity for what you say. What you talk about and how you talk about it has to resonate at least at a group level. Segment your market, know your segments and speak to them.

Raison d'ĂȘtre: if you are not associated with anything, you are not going to inspire recipients to open, follow, and engage with you. Worse: brand image abhors a vacuum. If you don't define it, someone else will. Define your brand, broadly enough to encompass all your markets, but solid enough to shake a stick at.

Minimize FUD: for better or worse, Fear, Uncertainty, Doubt form the cornerstone of a lot of marketing. But we're talking about retention, relationships, engagement, and loyalty here. Who wants to be in a relationship based on fear? Lead with positive value propositions.

Choose channels: Use the channels that make sense for your customers, especially for support. These may be email, but could be social, forums, chat. Know which channels you need for which situations and use them appropriately.

Enlightened self-interest

In ethics, this is the idea that acting in the interest of others, or the community, will ultimately serve your own self-interest. In the context customer loyalty and retention, we're talking about going the extra mile--especially before it's requested--to reap the rewards of repeat business.

Extreme examples of this are tech companies that contribute to open source. But you don't have to give away the farm here. Look for smart, cheap leveraged ways to show appreciation or to give away some value. A little goes a long way.

And don't wait until you're apologizing after an issue or a mistake. (Though it doesn't hurt to go above and beyond then too!) With individuals, personalize offers and gestures based on what you know about them. If recipients organically share tales of your greatness--great! You've earned it. But don't overplay your hand with bragging self-promotion. Like FUD, it's a turn off.


I refer you to the Hook Model from Nir Eyal's research (and detailed in his book Hooked: How to Build Habit-Forming Products). The process starts with a trigger. Based on the trigger, participants take an action. So far so good. But they need a reward for their action. Reward in hand, they are likely to invest in the process, which increases the likelihood they'll cycle again. Keep that cycle repeating and you've created a habit.

These cycles don't just happen. You have to design for it: relevant triggers, low friction actions that deliver valuable enough rewards to drive investment in repeated cycles. You do this by effectively folding in the communications and rewards we've covered already.

One obvious application is to loyalty programs. A card in someone's wallet with a hole or two punched is not much of a platform for a trigger. Mobile apps and messages, social media, and email offer great opportunities to create triggers, actions, rewards and investment of the Hooked variety.

Beyond loyalty programs, find ways to work the cycle into all your initiatives and processes--from your nurturing campaigns to your support platform.

Community support

Since you brought up support, don't just provide phenomenal customer support of your own (though that's a must). If it makes sense for your market, create a community of support.

Often the hard part here is retaining the intermediate level customers. Beginners need a lot of support. And long time users are knowledgeable enough to give support. Intermediate users, though, may not need to ask a lot of questions and may not feel qualified to answer questions. So they drop out.

One key to keeping them engaged is to create an environment that is as useful and as free of attitude as you can. Don't let experts abuse incomplete or incorrect answers--that scares off everyone, even beginners. Next, create a habit through triggers, rewards and investment. As with anything, the right incentives generate the right behavior.

Buying process

Finally, let's not lose sight of the point of all this. You want loyal customers that return for more. You don't create enthusiastic, loyal repeat customers if your buying process sucks. This isn't just about too many clicks, constantly re-entering the same information, or bad exchange policies. (Although those things do indeed suck.)

It is, again, about folding in the right communications, the extra-value adds, making promises you can keep, and delivering the support and information needed to accelerate a decision. And it's about following through after the sale, which not only enhances the current buying experience, but queues up the next trigger!

Don't just not suck. Be awesome to do business with.

Ready to do some retention marketing? Here are a few tools of the trade to get started:

  • Retention Marketing rocket science: Retention Science (www.retentionscience.com)
  • Support platform with the right attitude: Help Scout (www.helpscout.net)
  • Content marketing strategy, resources, how-to: Content Marketing Institute (www.contentmarketinginstitute.com)
  • Hook Model and behavior engineering: Nir & Far (www.nirandfar.com/hooked)

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