Customer Retention: The Key To Growth

CUSTOMER RETENTION:THE KEY TO GROWTH

Retention is by definition an ability of business to keep their

customers

1 2 3 4 5 -

100 200 300 400 500 600

Ability to retain customers is the key driverfor long-term value creation

New customers: 100/mthAverage spend: 10$/mthFirm A churn: 1%/mthFirm B churn: 5%/mth

k USD

4% churn difference in 5 years leads to 55% lower revenues

EXAMPLE

Year

Firm A

Firm B

Growth without solid retentionis attempt to fill a leaky bucket

Often overlooked 3-step conversion model provides good guidance for retention increase• Visitor – Visitor • How well do we keep our visitors?

• Visitor – Customer• Do we convert visitors to customers?

• Customer – Customer• Do we motivate customers to shop again?

Bad retention problems impair company growth, cash-flow stability and brand image

Low growthChurn forces company to

acquire more users to keep base, leading to

increased cost and lower profitability due to low

LTV/CAC ratio

Low stabilityChurn makes future

income less predicable, worsening outlook and valuation of company

Bad imageCustomers leaving the

company spread negative word around

making future acquisitions harder in

the long-run

Trying to fill the leaky bucket leads nowhere if you do not remove its primary cause

Imagine heaven where you do not lose your customers anymore. How can get there?

Measure and analyze

Online firms have to use analytics to

understand users

Search for trends

Look for trends and common traits

connecting groups

Test and iterate ideas

Make experiments to see what works best

for your company

You cannot manage without measuring – using a quality analytics platform is a necessaryMeasure and analyze

Google Analytics is a good start, but does not suffice in the long-runLook for platforms, that:

1. Are customer-centric 2. Work with real-time data3. Enable deep dive to data4. Allow advanced filters & views5. Provide engagement features

Initially focus repeat purchases in conversion funnel and cohort behavior

Funnels• What are conversion paths?• Where are the bottlenecks?• What’s a time to conversions?Retention cohorts• When do customers return?• How long customers stay?• How it changes over time?

Identify KPIs and watch trends

1st purchase

2nd purchase

3rd purchase

4th purchase

Purc

hase

funn

elCo

hort

an

alys

is

Data-based hypothesis need to be systematically A/B tested in campaigns

• Conversion funnel can be influenced by well timed actions• AB testing helps to find positive

changes faster and eliminate impact of negative changes • Hundreds of small tweaks has to

be tested, companies need to run campaigns very effectively or they stay in a dark age

Test and iterate ideas

Good analytics platforms will help you improve both product and communication with users

There are two viable roads on the way to better retention rates, good platforms will enable both

Improve product

Users might not get enough value from your

offering

Upgrade communicatio

nUsers may not

understand how they can get value or how big

the value is

Decrease prices

Cheaper product may make users more

tolerant to its flaws

Road to hell in the long-run

Combine robust analytics and campaign feature to test and immediately implement your findings

• Set up company structure and processes so you can easily change design and functionality without lengthy discussions• Continuously evaluate customer

journey and behavior to identify potential pain points• Use A/B tests to evaluate user

preferences• Proactively collect user feedback

Improve product

Campaign management tools help with quality of communication and customer experience

• Use insights to streamline andpersonalize communication• Well timed actions with right

message delivers wow and leave long lasting emotions• Design campaigns that would

accompany users throughouttheir journey and life-cycle

Upgrade communication

2. Track and analyze

user behavior to see trends and pain

points

1. Set retention as your

first priority if you have long-term

ambitions

3.Test hypothesis and

use data to align product and

communication

Way to 100% retention is long. Start today.

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