How to Optimize for Customer Retention Throughout the Customer Journey

“Hyper growth” agencies are everywhere. Many of them are saying the same thing: ‘We’ll acquire, like, SO MANY customers. We’ll even promise to only be paid a percentage of your ad spend.’ But it is your customer retention that will ultimately cap your growth, no matter how effective your acquisition efforts. 

These marketing agencies often ignore the relationship between growth and retention. By discussing them as discrete aspects of an overall strategy, they encourage marketers, perhaps unintentionally, to pursue acquisition regardless of the onboarding and activation experience, which can cap growth as dissatisfied customers abandon the product. This is particularly true with early-stage companies still searching for product/market fit.

While growth agencies are certainly helping acquire thousands of customers, an exclusive focus on acquisition can leave companies with a multitude of problems. Chief among them are a poor customer experience and correspondingly low customer lifetime value. But by applying a retention mindset to all aspects of a customer journey, especially acquisition, these same companies could increase customer lifetime value (LTV), increasing profit and/or acceptable CAC thresholds. When working together properly, acquisition and retention are symbiotic.

It sounds weird, but think of this in terms of a bath. Yes, you start running the water (acquisition) and try to feel out the right temperature, which takes constant adjustment. But if you don’t plug the drain (retention), then the water you’re pouring in will run right out of the tub. You will never have a good bath.

Underestimated Customer Retention Lever: Your acquisition efforts

Your acquisition efforts should focus on the right customer for your brand. Acquiring a customer who will buy again and again is more valuable. The unseen issue facing many marketers is a reliance on paid strategies that acquire large numbers of customers, even at a 1+ return on ad spend (ROAS), but ignore the downstream efficiencies of acquiring a customer who will subscribe or make repeat purchases.

Focusing on efficient spend at the point of purchase and disregarding down-funnel behavior (or lack thereof) is a common mistake. The reality is that incorporating customer retention and LTVs in acquisition efforts is hard and most growth agencies have little incentive to force the issue. As a result, it’s the responsibility of the company to lead the effort. This is easier with an hourly compensation structure, like with Right Side Up (not a “growth agency,” but applicable in this case).

Targeting

Facebook has been pushing advertisers towards its own algorithm and broad-based targeting. Maybe the magic behind the algorithm is incorporating LTV data they’re able to track (basically just limited repeat purchasers and high order values), but what about the wealth of data they aren’t able to track? Facebook pixels can only do so much. For subscription D2C businesses in particular, Facebook’s algorithm isn’t incorporating their customer renewal data happening behind the scenes through payment processors. Luckily, there are a few methods to counteract this blind spot:

Subscribe vs. conversion: The Facebook pixel allows users to set the event being tracked, so take advantage of their existing events by setting up disparate Conversion or Subscribe events for respective types of purchases. From there, budgets can be optimized for one event or the other.

Note concerning optimization: Subscribers, generally speaking, have a higher LTV than one-time purchasers, so lean towards allowing a higher CAC for Subscribes over standard Conversions.

Custom lookalike campaigns: Splitting budget between Facebook’s broad targeting and your own custom campaigns allows you to take advantage of both. In this case, pumping in an external email list of the top 25% of customers by lifetime value allows you to build a lookalike campaign consisting of the most valuable customers—customers that Facebook has no method of recognizing as highly valuable.

Conversion

Now, targeting the right customers, let’s convert them effectively. To do this, align targeting to the different stages of a marketing funnel from ads to landing pages to email on through to the product experience. Many in ecommerce are following the practice of creating multiple ad sets to address different use cases, but sending all traffic to the same homepage (sometimes even a homepage with an entirely different value prop than most or all of their ad sets). Not only is this hurting conversion efforts, but it also sets disparate expectations than what a product may provide. Not meeting customer expectations, especially those we set ourselves, is a surefire way to lead to immediate customer churn.

Facebook ad creative: Custom targeting should be matched with creative that addresses the use case of the buyer persona being targeted by that campaign. For example, why communicate the variety of flavors to personas more interested in nutritional content? Not matching ad content to the use case of your personas will make the ad less effective.

Bonus: As with targeting in the previous section, using LTV data tied to the different use cases of your product gives valuable insight into how to set ad budgets according to the CAC you can afford for a particular use case. Simplified, Use Case B = Buyer Persona B = LTV (of B) therefore you can afford to spend according to that particular LTV. Not only does customer retention data help with conversions, it helps use spend appropriately.

Landing pages: Attracting customers according to their use case creates effective ad spend, now capitalize on-site traffic by making cohesive messaging and purchase experiences. The value proposition and messaging where ad traffic lands should match the reason prospects are clicking the ad in the first place.

Email conversion: Since the likelihood of converting paid traffic into customers on their first visit is small, email address collection often needs to step in to bridge the gap between awareness and purchase. For efficient and effective email conversion campaigns, collect use case information along with the prospect’s email. Crafting your email conversion flows according to use case segments allow for on-message emails that address exactly why a potential customer may be interested.

The job is not done. The product experience has to follow through.

Best Customer Retention Lever: Your product

The time and effort involved are large, but the product will ultimately determine the churn floor. Marketing and guidance efforts will only help approach that floor. It is therefore imperative that you constantly improve your product based on the feedback, both stated and unstated, of customers. The end result (though this process never ends) should be a product that is ‘sticky’ through solving its customers’ needs time and time again.

The natural way to understand what customers need from you is to ask. Survey them. Get on the phone with them. Ask them to give true and honest feedback. Do this with customers who give negative NPS results especially. Listen to the hard truths in order to further evolve your product in a way that reduces churn. 

A lot of times though, the most unhappy customers are the loudest customers. Don’t change an entire business model to suit the vocal minority. Instead, dig into the data of how customers are engaging with your product. Here are a few examples of what to look for:

• Abandonment points in your first-time user experience
• Features/products with low usage or purchase rates
• User segments not using a product (or not using it effectively)

OctaneAI, an SMS and Facebook Messenger automation platform, uses a combination of these strategies in order to build products that earn their ecommerce clients more revenue. When OctaneAI noticed customers were engaging with but abandoning their pop-up collection tool, they took the steps to chat with customers and find out why. While contact info and opt-in is absolutely key to a successful SMS strategy, OctaneAI found that customers were using other collection methods due to the limited customization available in designing pop-ups.

The key, though, is to not stop there. OctaneAI capitalized on their data and customer feedback by updating their features. Now OctaneAI has helped their customers achieve 25% higher opt-in rates by making their pop-ups customizable with multiple layouts across devices and pages. One step further, OctaneAI has increased their own retention by tying customers into a cohesive, effective ecosystem.

Natural Customer Retention Levers: Your owned media channels

While there are more effective ways of reducing customer churn, no lever is as effective AND easily manipulated as your owned media channels. Seamless transactional messaging, activation, and relevant content are as much a part of your product experience as the packaging.

A guided first-time user experience should address avenues of customer churn that occur within the first natural billing cycle. For a highly-priced SaaS product, that cycle may be a year. For a consumer product, that cycle could be a week or a month. Where a SaaS product may fall back on an account manager to convey complex topics, consumer products are almost completely reliant on owned media channels to support a positive product experience.

Email/SMS

Look no further than the episodic murder mystery game, Hunt A Killer, for an example of a masterfully guided product experience. Hunt A Killer is a highly unique subscription experience, giving the marketing team a few opportunities to nurture a user’s gameplay experience.

Through the use of both time and trigger-based emails, Hunt A Killer connects its first-time users with the exact information they need at the exact moment they need it. Let’s take a look at the basics:

Email #1: Introduces crucial elements of customer experience and the Hunt A Killer community (Day 0)

Right out of the gate, Hunt A Killer (HAK) connects new customers with their strong online community of true crime/murder mystery fans, both ingraining them in exciting (spoiler-free) discussion and providing an experienced resource for any questions. HAK also addresses the unique episodic aspect of their subscription experience, setting expectations that customers will not complete the entire mystery in a single shipment.

Email #2: Introduces crucial elements of gameplay and what to expect (Fri/Sat after Day 3)

While HAK is a mostly analog experience, there are online aspects of evidence and correspondence that are highly immersive. These digital elements, including how to fully complete an episode, are laid out here right around the time the first episode is arriving and, specifically, on those days episodes are mostly likely to be played. By connecting users with the right messaging at a time they are more likely to be engaged, HAK ensures more customers understand how best to play.

Email #3: Provides gameplay resources and reminds players to complete their episode (Fri/Sat after Day 6)

Sometimes an episode sits around for any number of reasons. This email corrects for all by reminding customers to complete their episode and providing additional resources if players need a hint. Again, this email is timed for when customers are most likely to be able to gather and play. 

Email #4: Introduces concept of expediting next episode ahead of schedule (Triggered by episode completion OR after Day 13)

Understanding that customers may disengage waiting the standard month between episodes, HAK communicates the option for engaged users to speed up their subscription. By segmenting this email based on customer action, HAK accomplishes two things: 1) they engage with their best users at the exact moment they are playing their episode, and 2) they gently remind those customers who haven’t been able to play yet.

Jeff Bartlett, director of lifecycle marketing at Hunt A Killer, on the effect of this particular strategy:

“Timing is everything. We saw a lot of feedback from users who wished they could get their next episode sooner; that’s a feature we already offer, so we knew the message wasn’t getting across. We added more explicit instructions to our post-purchase email drip campaign and nearly doubled our conversion rate. But when we launched a triggered message offering this feature right when the user completes a previous episode—the moment when they are most engaged and most likely to want their next box faster—we doubled it again.”

Community

Your community of users can also be one of your greatest assets by adding value beyond your product. As you saw in the Hunt A Killer example, the very first CTA in their email welcome series is to join their community. The community provides a like-minded space to discuss all things Hunt A Killer and true crime. Now more than ever, a community expands upon the value of your product through providing a social space. A social space that offers discussion and advice on the topic at hand. A space full of your brand’s advocates that help you retain customers.

Watch Gang is another classic sub-commerce example of using a community to connect customers around a topic of passion. Where Watch Gang takes it a step further, is by tackling a specific churn issue within their community. Sending a large group of customers a watch every single month, you’re bound to have some who don’t like the watch that month despite all your efforts to match them with the right one. Watch Gang’s community uniquely combats this by providing, and encouraging, a space where users can buy, sell, and trade watches. Don’t like this month’s shipment? Sell or trade it. You obviously can’t miss the mark on each month’s shipment, but by providing this space Watch Gang buys themselves a do-over or two to match the customer with the right watch.

In Conclusion

In order to increase customer LTV, all of these elements must come together. Customers have to be persuaded towards brands/products for value props that solve for their use case, guided and set up for positive outcomes by messaging, and then rewarded by product experiences that follow through. This is the constant effort to take customers from moment to moment, interaction to interaction, that regularly activates them, driving repeat, cross-sell, and up-sell purchases.

Interested in discussing your retention marketing strategy or hiring a growth marketing expert to improve your customer retention? Reach out to hello@rightsideup.co – we'd love to chat.