It’s no secret the key to customer retention and loyalty is understanding how a customer or user behaves – and thinks - as they interact with your product, brand, and/or service. With three kids at home, I find myself thinking about the major phases of life - and the parallels with each life-stage of customer retention.
Phase of Life #1: Infancy - (aka Onboarding or Trial)
Milk, sleep, and the occasional smile are all a baby needs to thrive. Basic, functional needs.
Similarly, when a customer or user first onboards or tries a product they need super simplicity and functionality. The #1 job of Customer Success, Marketing, and Product is to make the trial or onboarding experience simple-stupid and remove all barriers or friction points.
This is hard if you’re already thinking about long-term customer retention. Example: I recently went to sign up with a athletic clothing e-tailor. I saw an ad and the product looked compelling. So I went to their site, browsed several outfits, chose one, and went to check out. Only at check out I learned that in order to receive my trial offer I would be automatically enrolled in a subscription – and the rules to cancel were allusive. A subscription seemed presumptuous when I had never even seen or tried on the product. It all became too hard and not worth the time. Phase 1 and they lost me.
Successful trial or onboarding in services may be more ambiguous. Is trial when a user completes the sign-up process, or does clearing Infancy mean completing a specific set of actions? In software this could include things like uploading content, adding connections, changing settings, or using a product x number of times.
Phase of Life #2: Adolescence - (aka Active Usage)
Adolescents learn to walk, run, think, play, and learn. With consistency, repetition, and positive reinforcement, habits form.
Ensuring customer retention is impossible unless customers are actually using your product. At Box our Customer Success teams use a very simple product usage metric to determine whether a customer is active with our product. If below our target threshold (after a number of days allowed for onboarding), we deem the customer at risk and proactively intervene to help drive user activity. Often a lack of activity means something went sideways in the onboarding process.
In one of my favorite books, The Power of Habit, Charles Duhigg talks about the power of Cues and Rewards in establishing a Habit Loop. Driving customer or user loyalty means supplying Cues for the actions that will help you meet your thresholds – and the Rewards to ensure repeated behavior. Example: years ago, a study revealed that the habit threshold for Twitter was 150 followers. At 150, users go from using Twitter for personal use to sharing with a community of people. This is why Twitter dedicates so much real estate to establishing followership, and enables positive reinforcement through Replys and Retweets.
Phase 3: Maturity - (aka Deepening Commitment)
Choices determine how adults will fare and contribute to society, and differences between adults grow wider than they were in Infancy or Adolescence.
Similarly, being active with a product is not enough for long-term retention. It is not IF a customer is purchasing or using, but rather HOW and WHY. In today’s world of transparency and low transaction costs, successful business models are quickly replicated or disrupted. A customer could be highly active and still defect to a competitive product.
At Box, we recently launched a “Customer Sophistication Index” to understand exactly how customers were using Box. We found a customer could look “active” but still be at risk if not taking advantage of Box’s more advanced features and use cases such as collaboration, mobile, custom applications and industry features.
Ensuring customer retention means deepening the relationship or navigating the customer to increasingly sticky usage. This could mean adoption of advanced features, cross-sell into more categories, greater personalization, service/rewards based on loyalty, etc. This is why Best Buy bought Geek Squad, and why Wal-Mart’s expanding into financial services. Both are retailers threatened by online retailers trying to increase share of wallet and drive long-term customer loyalty through in-person services.
The strategy used to deepen commitment will be more heterogeneous than in Infancy or Adolescence. Analytics can help differentiate needs, attitudes, and behaviors of distinct customer segments.
Each life stage has a distinct customer objective. Understanding your primary objective and tailoring the customer experience accordingly will help ensure long-term customer retention (and revenue!). Creating an optimal customer experience requires having a strong CEO-backed cross-functional focus on retention, encompassing product, marketing, and customer success.
What I call reverse analytics can help illuminate exactly which customer actions enable your objectives in each phase and progression to the next. I recommend identifying no more than 3 metrics and the thresholds you want to conquer in each phase and then designing the customer experience to make it happen.
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