Can Retention be greater than Acquisition? Slow down and Flatten churn.
Retention — the act of retaining what you already have. As you know, there are different channels where your marketing strategies usually work. One of them is the Acquisition, a method of marketing your product to potential customers and hoping that they would buy or use your product at some point. So, is retention one of the most underrated channels? Is it greater than the acquisition? Let’s check it out.
Do you know that the likelihood of converting an existing customer of your product or service to a repeat customer is around 60%-70% whereas converting a new lead is around 20%? Usually, everyone is ready to spend more on the acquisition without realizing the fact that it’s so much easier to retain customers you already have a relationship with because you would not need to attract, educate or convert an already converted lead. Your customers are already aware of your product and engaged with your brand. Retention is long-term and increasing it by at least 5% can lead to an increase in profits by 25% to 95%. So, that makes retention one of the most sustainable and effective ways to grow your revenue.
What does great retention look like?
When it comes to apps, active users matter, people who are logging in to your app matter. This is where the users are getting the resources and they find value in paying for your product. It’s essential to keep your users around because people are easily distracted and they have a plethora of options available out there. But, it doesn’t mean that you have to keep every single customer forever. Assume that around 10% of your long term users pay around $50 a month for your product. These users will not immediately upgrade but slowly over time. Eventually, you would see a good revenue in 5 years. That’s how long term retention works.
How to calculate your retention rate?
Calculate the percentage of customers who are still with the company after a specific period of time/ Total number of customers at the start of the same period of time.
One of the most important things to note here is that you need to know how to monetize your customers once you acquire them for the long term.
But, what are some of the key factors to become a long-lasting company?
- Tackle the low hanging fruit everyone else is missing. Talk to your customers without making it a product calls.
- Understand the habits and psychology of your customers
- Ask your customers why they do what they do. What did they want when they started using the product.
- Set up interviews with open-ended questions
- Gradually, make a timeline of your ideal customers.
If you are aware of the different segments of your customers, you can easily create a messaging exclusively for their journey and that would eventually increase long-term retention and thereby encounter the WOW moment. Segmentation can be classified as 2 types.
- Buyer Attributes — What do we know about them
- Behaviours — What do their action tell us
If you aren’t segmenting your customers, you might not realize that you need to take a more high touch measure with your bigger accounts. The predictive patterns vary for different sized companies. Segmentation clearly defines who fits into your club and how you speak to them will change the way that you retain your customer long term.
Does customer engagement have any role here? Yes, Lincoln Murphy — a growth expert says that engagement is when your customer is realizing value from your SaaS. When you encourage real engagement from your best customers, you are building which builds customer loyalty. So, Customer engagement is beyond Acquisition and Retention is greater than Acquisition.
The best way to get your customers to rely on your product is to make them use it again and again. How do we do that?
Emails and In-app messaging are some of the best ways to trigger your customers to use your product more often. Emails are a great way of engagement and re-engagement whereas In-app messaging should be all about helping your customers. When you speak to your customer’s pain points and show them how your product can bridge the gap, you eventually get their attention. The first impressions matters as well. When your success is seeing the revenue come in of a paid new customer, their success is getting the outcome that they wanted from your product and seeing the benefit of the product.
There are 2 cycles that define the habits of the user and the success of the product. Let me list them down here and how they help in retention.
The Hype Cycle
While marketing your product, there’s hype and then there’s what actually works. When there’s hype, there’s a wonder whether claims that the companies are making would pay-off.
There are 5 different phases of a hype cycle and they are :
- Technology trigger
- The peak of inflated expectations
- Trough of disillusionment
- Slope of enlightenment
- Plateau of productivity
The habits of a user are formed at the end of this hype cycle. This cycle helps you to understand your product journey and the path that you go on as a customer.
With Hooks cycle, every successful product reaches their goal of unprompted user engagement bringing users back repeatedly without depending on costly advertising or aggressive messaging. The hooks model has 4 steps and they are :
- Trigger — Something that kicks off
- Action — Helping your customers to do something
- Variable reward — Creating a craving for customers
- Investment — Repetition of the above 3 steps more times
Measuring and improving your retention for long-term is inevitable when it comes to a SaaS product. The Qualitative and Quantitative data has a great impact on retention rates. This data will make things like product road mapping, customer support decisions and marketing plans easier. But, where do we store all that information? That’s when you need the help of certain tools. Some of the most popular analytical tools are Mixpanel, Amplitude and Segment.