How to Engage and Retain App Users. Part 2: Retention.

As you already know, user engagement is not just another fiction of marketers. It is a survival technique in the wild world of the digital market and a method for your business to stay afloat.

Speaking of engagement and retention, there is no clean-cut separation between these terms in marketing apps. They rather complement and sometimes interchange each other. You may have your vision, but retention is always more about work with an existing base of users which in turn requires a specific strategy and tactics to get them back.

To a certain degree, user retention is a challenge. The app market is full of applications and each coming day their number skyrockets. Like it or not, but you have to fight for user attention for your own good. If you are not ready for it, you are not ready to run your own business in today’s realities.

Marketers from all over the world must agree that the key to a good retention rate is engagement with app users as early as possible. So, it is a compelling reason to bring value into relations with your customers from the very beginning of their journey with your application. According to Bain and Co., user retention increase by 5% can increase your company’s profitability by 75% at least. Quite impressive stats, isn’t it?

So why not make your app engaging for users and stay in contact with them during all their journey? In this sequel about engagement we will talk about user retention and things to consider about launching retention marketing nowadays.

Move in the right direction

After you have launched your business in the market, it is like a ship on the sea. It is no easy task to keep it afloat that requires a considerable amount of work in a lot of fields simultaneously: strategy and resource planning, marketing, personnel administration and so on.

As every boat, business also has a certain destination. While strategy planning sets up the end point, marketing gives you a direction. So, to stay up nowadays, the main efforts should be put into relationship with users, not only into app ranking in app stores. When you give customers what they truly want, your chances to succeed increase.

Hence every marketing effort should be targeted at building customer relations in order to increase customer lifetime value (LTV). Speaking of this metric, it is one of the important indicators of your business health.

In a nutshell, customer lifetime value is a predicted revenue a company can get from the entire relationship with their customers. It gives a clear insight of your clients so that you could see how valuable they are for your business. In the majority of cases, LTV is used to define the target audience you need to acquire for your company growth.

Despite its vital importance, this metric is traditionally quite difficult to calculate. If you tried to do that for your company earlier, you probably struggled with complex algorithms and formulas. There are a lot of methods now and each one is developed to cover specific aspects of business. The most straightforward way to calculate LTV is to take the revenue you earned from each customer and subtract the money spent on customer acquisition and service.

How LTV can be used to improve app retention rate? First of all, it makes possible to define a group of customers you should be focusing more on in your engagement strategies. According to the Pareto principle, roughly 80% of the effects are produced by 20% of causes. The shares may be not so accurate but approximately 20% of your customers bring you around 80% of your total revenue.

By calculating LTV, you can define who those most profitable 20% of users are for you to target your marketing at. You need to make every effort to increase satisfaction of this audience and provide the most value right now. In the previous part, we have already described a couple of techniques to make users happy with your app, so you should definitely take them into account for all further actions.

Tip 1. Use LTV metrics as a basis for planning the budget for engagement marketing. Plan your spendings on user acquisition and app user retention according to their effectiveness in order to get maximum value for your company in the long run.

If you believe in power of analytics and user behavior patterns, you can move mountains. With the help of analytics data, you can identify your ideal target customer and create super personalized and winning campaigns. As said earlier, it is much more profitable to invest in interaction with existing users than acquire new ones. They already know your brand and would likely support your app monetization campaigns.

Divide and conquer

The roots of this phrase go back to the time of Rome’s emperors when they set landowners against each other to conquer and dominate over the lands. In your marketing strategy, you should apply this slogan literally — divide your audience into groups with common characteristics and “conquer” each of them accordingly. Personal approach to customers is what brings real results today and user segmentation will help you do it properly.

So, what is customer segmentation and what role does it play to increase customer retention rates?

Customer segmentation simply represents the process of identifying key differentiators to divide the audience into smaller groups with similar characteristics. Such segments are used to understand their needs better, define what content will be relevant and valuable for each of them and use it appropriately.

Segmentation is tightly bound to analytics data. Mobile analytics is certainly a very powerful tool today but data alone can’t drive user engagement and boost mobile app retention rates. Customer segments allow you to better identify user behaviour and their response to your marketing campaigns.

Tip 2. Customer segments don’t remain static so keep track of the users in your groups over time. Interests of people change so they can jump from segment to segment or even move out of all of them.

Segmentation of customers is more than just a simple process. It is a foundation for successful app marketing and great app conversion. It requires preparation and time to investigate people for further breakdown into groups. There is no rule of thumb on the number of segments to create. You can form as many groups as your business needs. The main principle here is that your segments should be unique, identifiable and different from each other.

If you don’t know where to start, start from separating your audience into three big segments. But keep in mind that a very broad segmentation minimizes your chances to closely target users while a too narrow segmentation may cause redundancies and decrease in profitability.

Tip 3. Track such audience factors like demographics, location, in-app behavior and device usage in order to strengthen your future marketing campaigns and target at your ideal customer.

It’s true, an ideal target customer really exists. This persona is not universal as each business has its own peculiarities and serves specific client needs. At the beginning of your way, you may have just rough sketches of your potential customers. The portrait becomes clear when you analyze and monitor your audience behaviour nonstop.

Once you have identified your target customer persona, you can adjust your services right to their wants and needs. In-app analytics will help you define your client’s characteristics and create the overall portrait of them. This data is very useful in building highly targeted campaigns. It also improves conversion exponentially. Remember that sophisticated marketing requires a sophisticated user segmentation.

Tip 4. Study your audience keenly and recognize their behavior patterns. This helps to build super personalized programs and launch them when the timing is right.

User segmentation together with understanding the customer lifecycle lay in the heart of engagement campaigns. Mobile marketing companies pay a lot of attention to these factors in order to keep user retention rates heading north.

Read full article on MLSDev blog.