Digital Marketing Optimization: Retention

The classic digital marketing processes are acquisition, conversion, and retention. In this four-part series on digital marketing optimization, I’ve examined successful optimization strategies to acquire traffic on a site and convert those visitors. In this column, I’ll examine how to optimize retention marketing.

First, let’s define retention marketing:

    Retention marketing is the art and science of converting someone twice without the pain and cost of acquiring them twice.

It’s not just about getting someone to repeat the conversion action, but using what you know about them to improve the chances of converting them again without having to go through the whole acquisition process again.

Somehow, “retention optimization” doesn’t quite sound right. I prefer to think of it in different terms. Once we’ve acquired a customer, we try to optimize her lifetime value. So I tend to think about this process as customer optimization. How can I optimize the return on the investment I’ve already made to acquire that customer in the first place? What data, tool, technologies, and processes do I need?

We typically tend to think of e-mail for retention marketing channels. Used well, e-mail can be a powerful retention tool. However, once you’ve transacted with a customer, multiple touch points can be deployed to increase the chances a customer will do business with you again. These touch points include the call center, the store, and the site, among others. It’s necessary to have one view of the customer that straddles these multiple channels. This is much easier said that done, especially for organizations with legacy systems that were developed over the years. Often, customer data can sit in a number of disparate systems, taking a huge data-cleaning and integration effort to get the data into shape and fit for purpose.

So having good quality data is important, but the next step is pretty important as well. We want to increase the likelihood that the customer will transact with us again without the cost of repeated acquisition. What we want to improve is the expected customer lifetime value. And the way to do that is to be in the right place at the right time by being relevant and timely.

Being relevant is about sending the right kind of messages, whether it’s by e-mail or on the site. Segmentation and personalization are approaches to increase relevance. These techniques, which may be manual or automated, leverage the insight you have about someone to present them with more appropriate and relevant. They don’t necessarily have to be sophisticated to be effective. And in the early days of your customer optimization program, being excessively elaborate can undermine the process. Remember, a key component of any optimization program is the ability to execute. That means you must ensure you have the processes and tools in place that allow you to act, measure, and react.

Let’s say you decide to improve relevancy by having a segmented e-mail marketing program instead of delivering a single e-mail each month. You’re probably on the right track.

If your resources and processes are geared up around sending out just one version of one e-mail every month, it will be a major step up to implement a segmented e-mail marketing program in which different groups of customers get different versions of different e-mail messages, possibly at different times. You’ll need to have a more sophisticated e-mail system that can handle segmented e-mail marketing programs and an extensive and robust database. You’ll also need to invest in more copy and creative material, and your processes must be more rigorous.

Walk before you run. Look for the low-hanging fruit. For customer optimization, the most critical point will be getting a customer to make the second transaction. Generally there’s a friction curve that must be managed. The steepest part of the curve comes in the early days of your customer relationship. The more times someone has transacted with you, the more likely she’ll do so again; the friction isn’t as high.

Getting a customer to repeat for the first time is the hardest part. So this is a special case in the program when timing can be vitally important. People are most likely to transact with you just after the last transaction with you. For this special group, recency is important. Get them thinking about the next transaction immediately after the first one.

Ultimately, profitable businesses are built on profitable customers, and repeat customers tend to deliver the majority of the profit. Acquisition and conversion optimization are essentially components of a success-marketing program, but optimizing long-term customer value is key.

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