10 August 2018
Many marketers focus primarily on the acquisition of customers and they often don’t worry about the ‘quality’ of a customer. As I will explain in a bit, the quality of a customer is way more important than many people think. To generate sustainable growth, you should consider the entire lifetime of a customer.
”For most marketers the job is done when a customer is in, for Growth marketers this is just the beginning”
The key here is, getting a customer is one part of the job, making them happy is even more important.
Well, here are three reasons to get you started (besides that they’re more fun to work with):
Why is the latter so important? If you retain your customers longer (retention), you will be able to earn more for every customer.
After that I will show you that the effect of retention is even bigger than you expect. Let me illustrate with an example:
So for a company like Netflix it is easy to see that retention increases LTV, the longer you pay for Netflix, the more you have paid. But for companies like Facebook or Dropbox, the reasoning is the same:
This stuff holds true for almost every company. Happy customers stay around longer, and people that stay around longer make you more money (doh!). So far, so good.
But wait, there’s (much) more!
Retention has a direct effect on the LTV of your customers. But what makes the effect of retention on Growth literally huge are, what we call, second order effects.
Remember the three reasons that happy customers are great? Retention is the main reason and thus the first order effect of having happy customers. This first order effect causes positive feedback on other factors, which we call second order effect. So what are this second order effects:
Like the Growth Master Brian Balfour has said himself:
'Retention is the 'King of Growth.’
There are many ways to increase retention and most of them boil down to one simple life lesson: Try to make people happy!
It turns out that by far the biggest factor to increasing retention, is to increase your onboarding. If you fix onboarding, you’ll massively impact retention. Onboarding is actually a whole set of ideas, designed to get your users ‘on board’ as easy as possible. Most of the drop-outs happen right at the start, if it takes too much effort to get to know your product, people chip out. Here is a good post that breaks this down to the bone. Also we cover it in our email course, for which you can subscribe below!
Working to increase retention rates is a great way to increase your growth that many people forget about. For the records: working on retention is also one of those areas where growth is clearly different from traditional marketing, and produces an outsized impact on the success of a business.
Modern growth marketing & user acquisition techniques