Businesses need to reduce the friction involved in moving the customer from one state to the next, whether that be moving from one page to the next or moving from one transaction to the next.
The digital world seems to be the world of “ones.” Most people only visit a website once. Often they only look at one page or only stay one minute. If they transact in some way, often they only do it once. I often think that the biggest task in digital marketing is to get someone to do something twice. Visit twice. Click twice. Transact twice. Because once you get them to do it twice, then it’s marginally easier to get them to do it the third time, and then the fourth time, and so on. It’s a bit like momentum on a bicycle – after you’ve started it’s easier to keep going. What businesses need to do is reduce the “friction” involved in moving the customer from one state to the next, whether that be moving from one page to the next or moving from one transaction to the next.
It’s commonly asserted that acquiring a new customer costs five times more than retaining an existing one. Like all generalizations, that one is probably a little bit dangerous as the mix of costs will vary enormously depending on the type of industry you’re in and the lifecycle of the business or products. However, I think all of us would generally recognize that it’s hard work getting new customers and it should be comparatively easy to keep them. So, how is reducing friction achieved and what’s the role of analytics within that?
Reducing friction within a customer interaction like a visit to a website is the realm of usability and user experience management. This has become a traditional application of digital analytics and optimization. Landing page analysis, funnel analysis, and multivariate testing approaches are all inputs into the process of digital interaction optimization along with other techniques such as exit surveys and usability testing. Smart organizations are able to bring these multiple techniques together in holistic testing and experimentation programs. But you have to wonder how much further sites can be tuned and optimized. How much higher can conversion rates go? (If indeed conversion rate is the right thing to be optimizing in the first place…). The next step is surely a shift in focus from conversion optimization to customer optimization. And by customer optimization I really mean customer lifetime value (CLV) maximization.
So, CLV maximization is about reducing the friction in moving customers from one transaction to the next and this is achieved through relevance. Relevant propositions, relevant products and services, relevant communications with relevant messaging. Relevance comes from an innate understanding of your customers’ behaviors, attitudes, and preferences and is the difference between digital analytics and digital intelligence. If I know when customers are interacting with me, the channels they’re interacting on, the content they’re consuming, the devices they’re using, then surely I’m in a better position to be able to build more relevant experiences across channels and deliver more relevant messaging and propositions. I can use that intelligence to begin to predict what customers might be interested in in the future by understanding what they have been interested in in the past. I may not be 100 percent correct, but I will certainly be more relevant.
CLV maximization requires a customer-centric view of the digital world rather than a site-centric one. I often articulate that these days through the notion of the “customer DNA.” Whereas your real DNA is your genetic footprint, the “customer DNA” is your customer’s digital footprint. Conceptually, it encapsulates everything you know about your customers’ interactions with you across devices and channels. In reality it’s a data table that aggregates behavioral data across properties and devices, summarizes consumption patterns and preferences, and integrates that with other data such as attitudinal and profile data. It’s the platform for relevance.
Retention marketing for me is the act of getting customers to transact again without having to go through the process of acquiring them again. Research has shown the significant impact that small increases in customer retention and loyalty can have upon an organization’s financial performance. I think that in our digital world of “ones,” retention marketing is beginning to come of age.
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