Retention, not just acquisition, the success mantra for marketers: Anand Jain, CleverTap
Guest Column: Anand Jain, Co-founder & CSO, CleverTap, tells us why user retention is a crucial element of growth
If someone asks you what the main goal of marketing is, what would you tell them?
Raising brand awareness? Increasing sales to new customers? What about reducing the churn of existing customers?
Reducing churn might not be something you associate with your marketing department. That's often the job of account management and customer success.
But today's marketers are starting to realise that user retention is a crucial element of growth. Why? Because of the leaky bucket problem.
The Leaky Bucket Problem
Success in the consumer app world is largely measured in terms of growth. The more users you have, the better. Think of it as a bucket—marketers are tasked with filling the bucket to the brim. But there's a problem: this bucket has a leak. There's a small hole near the bottom that keeps letting the water out. That lost water is your churned users. Research shows that 90% of users will churn within 12 weeks. Only three months after installing your app, nine in ten of your users will have either uninstalled or completely lapsed into inactivity.
That's a lot of water running out of the bucket that you're trying to fill.
So you have two options. The first option—and one that many marketers choose—is to find more water to put in the bucket. As long as you're putting in water faster than it's leaking out, you still show growth. You find water with marketing and advertising campaigns, sales pushes, referrals, and all the other things that marketers do every day. But there is a better solution.
Plugging the Leak
You can keep filling your bucket of users, but if 90% of them churn within three months, you're going to struggle to find new users after a while. The water that you can add to your bucket starts to run low. If you could plug that leak (or at least slow it), you could be looking at a significant boost in revenue.
According to Bain & Co., a 5% improvement in retention could help boost profits by 95%. But instead of trying to improve retention, marketers are still laser-focused on bringing in new users. Of course, user acquisition is still crucial; you can't grow your user base without them. Maintaining high user counts, however, requires that you don't lose 90% of the people that you onboard.
And let's not forget about the cost involved. Marketing campaigns are expensive, and onboarding takes time and effort. The average cost per app install in 2018 was $4.08 with the cost per in-app purchase going up to $74.93, and cost per subscription rocketing to a high of $148. Continually finding more users just isn't the most efficient use of marketers' time. If you want a decent ROI on your marketing and ad spend, you need to make sure the users you acquire continue to generate revenue. After all, the average repeat buyer spends 33% more than a new customer. Forget profit — a Bain & Company study claims you will never break even when you sell to one-time customers.
This is why marketers should focus on retention.
A New Focus on Retention
Consumer app marketers are learning that retention is a crucial component of both marketing and revenue generation. That's definitely good—but many marketers out there are still living in the acquisition-only age. It's time to get into a new mindset. Fortunately for marketers, there's a slew of tools that make focusing on retention easier than it's ever been.
Ten years ago, personalized marketing outreach to hundreds or thousands of customers would have been a massive undertaking. Most companies wouldn't have close to the number of resources required for such a campaign. But today, there are many tools that make this process not only possible but easy. Machine learning and artificial intelligence let marketers create customized outreach based on user behaviour with little human intervention. That means you can deliver the right message to the right person at the right time.
For example, think of a shopping app. Based on previous behaviour, you might discover that a user is primarily interested in discounts from a particular brand. Using that information, you can send push notifications when that brand's products go on sale. Even if that user had stopped using the app, they're likely to pay attention to that notification. You've just significantly increased the chance that this user won't churn.
What about something like a travel app? Machine learning will likely tell you that your travel app users are most likely to open the app between 10 AM and 2 PM. You can time your push notifications to coincide with the earliest and latest parts of that window to increase the amount of time the user spends in the app. The possibilities of machine learning and artificial intelligence are limitless when it comes to improving app user retention. And marketers best start putting those tools to use.
The Era of Retention
Right now, many app marketers can still get away with a focus on acquisition. But as more apps provide competition for the same number of users, things are going to get tight. Even the most successful category of apps—media and entertainment—are only retaining 24% of users after 90 days. That means over three-quarters of users are leaving in three months. That's not sustainable for long-term growth.
But some apps have built great reputations for retention. Netflix, for example, had a 9% churn rate in 2017, largely due to its legendary user experience. Some companies do even better than that—Facebook reported an astonishingly low 2% churn rate in 2015. How did they do it? By providing an indispensable service that can't be replicated by another app. Without a solid retention plan, your app's growth could slow—or even slide downwards. By placing a focus on retention before that happens, you'll maximize the value of every user that your marketing team brings to your app.
High retention numbers are possible. But you need to place a strong emphasis on minimizing churn to achieve them. Don't wait until things look dire. Start thinking about how to better retain your users today.
Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com
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