When it comes to customer experience, marketers have historically thought of retention last. For example, just 21% of respondents in a poll I recently conducted reported they prioritise retention over acquisition or monetisation.
However, consumer buying behaviours have changed in recent years, and economic uncertainty means new demand has stalled and existing revenue is at risk.
This means the way marketers drive growth must evolve. Enter the retention-first strategy. Today, every team is responsible for retention. For marketers, this means retention is no longer something the product team owns. Teams are increasingly bringing retention into a ‘holy trinity’ of customer experience, elevating its importance to sit alongside acquisition and monetisation. And this change is critical to long-term, sustainable growth.
So, why do marketers need retention strategies, and what steps can marketers take to incorporate them?
Why retention matters
Every investor, executive, and employee is keen to understand what is driving their business’s growth. Retention rates are critical here. The impact of retention extends across the entirety of a company’s financial performance, influencing everything from active users to the duration it takes to recover customer acquisition costs.
A business that effectively retains its users not only sees a boost in revenue but also can achieve profitability faster than counterparts with lower retention rates. When a retention rate surpasses the acquisition rate, products secure a consistent user base and a continual uptick in both users and revenue. Conversely, if retention rates lag behind customer acquisition, it results in a net loss of customers. The retention metrics represent a product’s genuine value, reflecting how well it resonates with and satisfies any given user base.
Building a strategy around retention
A common mistake marketers make is treating retention as a post-sales or product-only responsibility. However, when marketing and product teams align on a retention-first approach, they can gather essential user insights, giving them a deep understanding of customer habits that will shape their business strategy. Armed with a deeper understanding of customer behaviour, they can launch upsell and cross-sell campaigns directly from the product or through their sales teams. This approach boosts retention while also facilitating acquisition and monetisation through highly targeted and tailored insights that the customer desires.
This allows businesses to develop a comprehensive customer experience between both in-product and out-of-product features. For example, Netflix is known for its highly personalised in-product experience, recommending different shows as the customer logs in, or playing clips as they scroll through the app. However, it can also reach users out of product through email or social media adverts, further driving engagement. This holistic customer experience is now what customers demand from their products, further highlighting the need for a collaborative, retention-based strategy.
Empower teams with data
Another challenge businesses face is their product and marketing teams often work with different datasets. Naturally, marketing teams often have marketing tools, which typically focus on acquisition metrics, while product teams often deal with data from product usage. This leads to a lack of alignment between the two teams in terms of priorities and goals.
Product and marketing teams are now jointly responsible for answering questions related to customer lifetime value like, “How can we increase user engagement?” or, “Which user journeys lead to purchases?” To answer these questions, they need shared data to provide information on the features or journeys most likely to create repeat customers.
Today, ROI is everything. Customers are more demanding than ever, expecting products to be tailored to their specific wants and needs. This means teams must understand underperforming experiences and how to improve them. With the right data, product, and marketing teams can work together to ensure that experiences for all customers are fit for purpose right from the moment of onboarding. This alignment supports customer acquisition and monetisation, improving retention and increasing customer lifetime value.
Many digital-led businesses, such as Dropbox or Canva, are already using this retention-led approach to great effect, and it has brought them significant success in recent years. As a result, we’ll see businesses of all kinds adopt this approach as they look to streamline their data and ensure long-term sustainable growth.
Tifenn Dano Kwan is the Chief Marketing Officer at Amplitude, a leading digital analytics platform that helps companies unlock the power of their products. She previously held CMO positions at Collibra and Dropbox.
Tifenn's mission is to help shape the future of work through the conduit of marketing, powered by superior digital experiences that help people and teams reach their potential.
