retention hacking: what makes customers stay – and what makes them leave?

@johnnyforeigner

Retention Hacking

@johnnyforeignerAll content copyright: Ian Collingwood 2014

retentionhacking.com

Wednesday, 25 June 14

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@johnnyforeigner

Retention Hacking

@johnnyforeignerAll content copyright: Ian Collingwood 2014

retentionhacking.com








@johnnyforeigner


@johnnyforeigner


Ask any two year old: When an experience is enjoyable, we like to repeat it. And if you’re in business, people repeating things is good news

Belgium has a lot of rollercoastersWe went back to this one every year - we were extremely loyal customersIn fact, three years ago I went back with my wife. I’ll definitely go back there as soon as my son’s old enough.That’s long term customer retention.

Like I said - creating experiences that people enjoy is good business.

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By contrast...

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The measure of a good experience is whether people want to repeat it. If you’re in business - repeat business is good business.When people come back, everything is good.

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“Always, retention is our north star” - Neil Hunt, Chief Product Officer, Netflix

Almost every decision they make considers customer retention. Their marketing, their segmentation, the content they choose, their customer service department.

They have teams of PhD statisticians and UX researchers looking into this constantly. As a subscription service it’s obviously vital.

They have a culture of over-delivering - of obsessive focus on understanding customers.

And it pays off... 1000% rise in Market Cap in 5 years

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Amazon is another example - have you ever bought something and it’s not arrived or it’s been damaged?

Amazon will bend over backwards to replace it ASAP. No questions asked.Is this the cheapest way to manage customer service?

Why?

Because they know that people don’t leave because something goes wrong - they leave because of what happens next. How you deal with that error.

And it pays off... 380% rise in Market Cap in 5 years

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Apple of course takes this to the level of a religious experience.

When your MacBook dies they don’t send you to a dusty industrial unit on the edge of town for “tech support”.

Instead they invite you on a pilgrimage... for an audience with a Genius

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Enter a light, airy space filled with fellow believers...

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Touch and feel the holy relics...

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...onboarding


See the groups of happy novices being initiated and baptised into the one true faith

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...onboarding...onboarding


...or “customer onboarding” as we call it.

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Is this the cheapest way to manage customer service and tech support?Using half of the floorspace of some of the most expensive real estate in the world to NOT sell stuff?Not the cheapest, but very, very effective.Apple market capitalisation increased 500% in past 5 years.

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But still for most companies its...“Press 1 for sales.... 2 for customer service”

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50%GDP


There is a huge payoff, (AMZN, AAPL, NFLX market cap = 50% of Spain’s GDP) so why aren’t all companies doing this?

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Short term thinking


Retention is a noisy metric - it crosses departments.Retention is a lagging metric - changes take time to become apparent.

But our companies are divided into silos and our investors think short term.

This forces us to think short term too...like miners, not farmers.

Instead of seeing customers as something to be nurtured and grown, we are forced to see them as a mere resource, to be extracted as quickly and efficiently as possible.

Miners don’t care about the damage they do because by the time the damage is visible, their money has been made and the resource is all used up.

@johnnyforeigner

Long term thinking


Farmers are the opposite. The money is made at harvest time, after a whole year of hard work. They know that the decisions they take today have an impact months or years forward in time.

They know that they are dealing with a system and that changes in one place have effects in others.

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What’s needed is a proper shift in culture. But in the meantime, what can we fix?

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Segment


Not all your customers have equal tendency to loyaltySome have much greater loyalty than others and in particular, different channels of acquisition have markedly different retention patterns. Outbound sales often produces lower retention if you aren’t careful about it.Identify which customer segments stick around and go out to find more of them. Build retention metrics into your conversion analytics and optimise for customers who stick around.

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Dig in


Slice and dice all the data you already have to find Proxies: Things that correlate with churneg: Netflix use “Hours of video streamed” (But remember: it’s only a proxy. if you focus only on that you will go wrong).Also think about what I call “canaries” - events in a customer’s lifecycle that seem to predict they are likely to leave. Like an early warning. eg sudden reduction in usage pattern, series of calls to customer service, long periods kept on hold... etc.

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Success


Understand what “success” with your product means for your customersOne easy place to start is to check out what your heaviest users are doing and use this to guide your product dev and also to rethink your onboarding processTwitter example is useful here - they know what makes a customer likely to become a serious user and their onboarding process focuses on that alone.

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But all these are mere tactics, and unless you make serous changes, you’ll come unstuck once the quarterly earnings call or board meeting comes around. If you really want to make an impact, you need proper hacks. Hacking as in “hacking through the undergrowth to clear the land”.

@johnnyforeigner

make a commitment


The whole company, including investors need to agree:“We are in the business of making customers happy. The single best metric we have for knowing if we are succeeding is long term customer retention.”

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make a commitment

back it up


Remove all bonus and incentive schemes that are not directly tied to measurable increases in retention.Put in place a single metric that pays out to everyone in the company based on an agreed measure for retention for your business.

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Get everyone aligned on the goal and give them skin in the game and a focus on what THEY can contribute.

NASA’s famous janitor story - “I’m putting a man on the moon.”Netflix: “Highly aligned... loosely coupled”

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make a commitment

back it up

practice listening


If you friend asked you to advise on why they can’t sustain a long term relationship, you might ask them to work on their listening skills.Learn to listenCommit to spending 5% of the company’s time on actively listening directly to customers.

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How?Net Promoter System is as good as anything.It’s simple, it’s good for everyone who isn’t comfortable conducting proper interviews and it’s relatively painless for customers.Most of all, it provides actionable data over time and is (usually) a pretty good proxy for retention.

@johnnyforeigner

make a commitment

back it up

practice listening

build your team


You will need:A numbers person (quantitative analytic skills)A people person (qualitative analytic skills)A sponsor or champion (preferably CEO)A project person (to get things done)Access to the whole company as required

@johnnyforeigner

TWO RULES

transparency1


We all own the work of the team. We all get a say in what they do to help us all get better at retention.

@johnnyforeigner

TWO RULES

transparency1

qualitative & quantitative2


All ideas, projects, analysis and solutions include both qual and quant insight.

@johnnyforeigner

50%GDP


It’s a lot of work...But the payoffs are huge.

Which leads to the main point: Companies are now more important on our lives than governments.They like to talk about “relationships” and “trust” and “loyalty”.

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LET’S TALK ABOUT

LOYALTYWednesday, 25 June 14

So let’s look not at the loyalty that customers have to the company. Let’s look at how loyal companies are to their customers.

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My mum has a BT ADSL service for which she pays £50 a month.She lives on very modest savings and a state pension of £100 a week

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£2,800,000,000


BT last year made £2.8 billion in pre-tax profit.That is £53 million per week

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Gavin E. Patterson

£4,250,000


Gavin E. Patterson - CEO£4.25 million pounds in compensation per yearIn a month: £354,166£81,730 per weekIn one hour: £1,643

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£33


When I discovered my mum was paying too much for a crappy service, I checked out BT’s website.

To new customers, BT are selling a 5x better service at £17/month less than what she is paying.

Better service, nearly half the price.

@johnnyforeigner

1962


My mum’s had a BT line since 1962Literally, since before Gavin E. Patterson, current CEO was even born.Now THAT is loyalty.

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Gavin E. Patterson

“Companies can't take loyalty for granted...”


How did BT choose to repay this loyalty? (Given that Gavin Patterson in 2013 said that companies can’t take loyalty for granted).

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£33


Did they call and say “Hey - we’ll come and upgrade your service and reduce your costs. For free!”

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£50 Wednesday, 25 June 14

Nope.

Instead they left her with a crappy service delivered through 2 cables falling of the wall and kept filching an extra 17 quid a month from a pensioner, in order to boost the profits of BT and the bonus of Mr. Gavin “Can’t take loyalty for granted” Patterson

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Gavin E. Patterson

“Companies can't take loyalty for granted...”


Don’t fucking lecture me about loyalty, Mr Patterson... when you clearly don’t have a clue what that word means.

@johnnyforeigner

Thank youretentionhacking.com

@johnnyforeigner
