In our digital world, we have a well-defined notion of the customer lifecycle, namely acquisition, conversion, and retention. Acquisition is all about driving traffic to the site; conversion is about getting them to do something valuable when they get there; and retention is about getting them to do it again and again. On the whole, these processes are well-defined and well-understood. Many businesses organize themselves around these processes – they may have a team that’s responsible for each phase of the customer lifecycle. But is it as simple as it seems?
While the distinction between acquisition, conversion, and retention may look good on paper, I’m not sure that it’s as useful a way to look at it as it first appears, particularly in today’s multi-channel world. For instance, can you really talk about acquisition without any of the context around conversion? My column, “Acquisition Marketing – Where Is the True Value?” suggests that real conversion may be more complex than it first appears, particularly for some business models. But even if we look at some of the metrics that we typically use to measure campaign effectiveness, are they really telling us the whole story? Take “bounce rate” as an example.
Bounce rate measures the proportion of people that land on a site who then immediately leave without visiting another page. It’s a notoriously difficult metric to interpret and people often ask, “What’s an acceptable bounce rate for a campaign?” It’s also a potentially difficult metric to act upon. If there’s a poor bounce rate, why is that? Is it because the campaign has been poorly targeted and the wrong kind of people are coming to the site? Or is it because the user experience is so poor that people immediately leave the site? In larger organizations, those responsible for campaign development and execution would typically be in a different team than those responsible for the site’s user experience. For campaigns to be effective requires close coordination and collaboration between the acquisition team and the conversion team.
In the same way that the lines are blurred between the process of acquisition and conversion, they are also blurred between acquisition and retention. There are many different definitions of retention marketing but they all broadly agree that it is the process of converting first-time customers into longer term, loyal customers. In the digital world, retention marketing is often synonymous with e-mail marketing, as e-mail is seen as the primary tool for running retention marketing campaigns. I like to define retention marketing as “the process of getting customers to convert again but without the cost of acquiring them again,” as this raises the question of how much of what we call acquisition activity is really new acquisition and how much of it is getting existing customers to transact again? If, for example, existing customers are using PPC search to come back to the site, is that the most effective and efficient means of getting them to do business with us again?
In some work we did recently with a client, we connected their campaign data with some customer lifetime segments that they had developed using a type of recency/frequency segmentation. The main campaign objective was to drive initial conversion. When we looked at the source of traffic for the subsequent transactions for existing customers, however, quite often they were visiting the site on the back of these “acquisition” campaigns. In addition, we found that the higher frequency segments were more likely to be using these campaigns to click through to the site. In effect, they were “reacquiring” their most valuable customers all the time.
This raises two interesting questions. First, was the effectiveness of the acquisition campaigns being measured in the right way? Second, how could the company develop its retention strategy to reduce the cost of subsequent transactions? You could argue that the value of the campaigns should be evaluated in terms of not only the initial conversion but also the subsequent contribution of overall customer lifetime value. However, it could also be argued that alternative strategies should be developed to reduce the overall cost of customer retention and to improve overall customer profitability. Perhaps acquisition and retention are really just two sides of the same coin.