Design for Retention
Because Life’s Too Short to Put up with Bad Experiences
Let’s talk about retention. How do we, as product makers or service providers, keep our customers coming back?
A few years back, I was working for a successful E-commerce startup and we had a retention team. It was a small team completely dedicated to email marketing, and they had important KPIs like Daily Active Users, 15-Day Retention, 30-Day Retention and so on.
I always thought it was strange that the only tool they were working with to try and move the needle on these metrics was email marketing. After all, there were so many factors involved in creating an experience that retains customers.
According to The Harris Poll published at the end of 2016, in all major industries, it takes one bad experience to make between 44–55% of customers jump ship, and if you make it two bad experiences the numbers go way up to 82–91%. Now add the statistic saying It costs 6–7 times more to acquire a new customer than retain an existing one (Bain & Company), and it becomes very clear that investing in good customer experience is money well spent.
So what actually affects customer experience?
The short answer: any interaction (touch point) the customer has with your brand. The longer answer: it’s a journey. A customer journey.
The customer journey starts with the discovery of the need for what you’re selling. At this point it’s crucial to understand who your customers are (not as simple as it sounds), the context and urgency of their need, and their state of mind.
Next, when customers start going down your funnel, it’s critical to understand what stops them from getting what they came for. This step is all about reducing friction on the way to achieving the first success with your product or service.
Now we get to the really interesting part — after your customers got what they came for, how do you keep them coming back? It depends on your business model, right? It’s generally agreed that in a transaction-based model you need to work hard to get returning customers. But in a subscription-based model, you basically need not to break anything and you should be fine.
It turns out that it’s not that simple. Maybe if you offer a subscription-based model for a product or service no one else can offer that’s good enough, but with competition it’s a whole different ball game.
Introducing Retention Design
The methodology that will make you a learning, adapting, customer-centered business is called Retention Design and these are its core guidelines:
- Talk to your customers. If you have several types of customers, talk to customers of each type — you won’t believe the amount of insight they carry about your product/service. Ask them about their experience with the product, what problems it solves, what it doesn’t currently solve, what they like about using it and what frustrates them. If you implement just one thing from this entire article let it be this.
- Create a direct two-way communication channel between customer support and the product team. Your customer support reps are often your biggest customer experts, they are on the front line of every problem, inquiry or assistance request. A channel on your preferred internal communications app and a weekly feedback meeting will allow all the great insights learned by your support team to affect the product road-map. Don’t just expect product managers to follow support tickets. Everyone is busy and, although very important, reviewing tickets can easily become a low-priority task.
- Plan for the “moments of truth”. Customers will have problems, there is no way to avoid it. But it doesn’t mean you can’t plan for it. Map all the sensitive areas of your product, such as payment disputes, rating disputes, fraud or Terms of Service violation disputes. At these crucial moments, a bad experience almost certainly means goodbye. Create a playbook for your support team with the desired responses to these cases and make these cases a very high priority to manage.
- Learn from Churn. When customers decide to leave, make sure you learn everything you can from their experience. For a subscription-based model use exit surveys with an open-ended question like “what made you cancel?” (as tested and perfected by Alex Turnbull). For a transaction-based model monitor regular customers and if they stop coming back contact them to understand why.
- Communicate effectively. How often you talk to your customers matters, what you say and how you say it matters even more. Create your own tone of voice and strive to create relationships with your customers, as opposed to just trying to up-sell. The most effective communications are those that come in the right context and deliver actual value. (For example, a simple “thank you for your order” email becomes much more helpful with an order tracking number, and even better with a link to the relevant tracking service.)
Retention is a customer-centered process. It’s a cross-team effort and you can always make it better. If you’re worried about bringing other stakeholders on board, start with low-budget measurable improvements — they will deliver the quick wins you need to fund bigger retention initiatives.
“As the people who craft experiences, we have a profound responsibility to not take for granted the limited time that people have on this earth and to make that time as painless, as empowering and as enjoyable as we can, because this is all there is, and it’s up to us to make it better.”
— Aral Balkan
Originally published on CXtlv Blog. Visit us for more great content!