Customer Retention - Are You Missing this Vital Element of Growth?

The term "Growth Hacking" or Growth Hacker Marketing itself suggests that growth is a primary goal, or to use a little nerd speak, we could say it's a prime directive.

But growth takes place in many ways depending on the stage a business is in.  Growth can take place in a long established brand just the same as it can in a start-up.  Growth can also take many forms, depending on what the team has determined to be the goal.

Growth is measured in users, customers, revenue and several other ways that can demonstrate movement in the right direction and traction.  While revenue may the be the life blood of a business in the eyes of many people, I would suggest that traction is the oxygen.

But to often, way to often, growth is equated to acquisition.  Acquisition of customers, users, downloads, signups or whatever it may be. Marketing teams can become so focused on acquiring new customers that customer retention can get overlooked.

When this happens, customer acquisition begins to work in opposition to growth and you become the little mouse on the wheel above (courtesy of www.animateit.net).

"If you are focused on profit, Customer Retention will boost your profits. 

According to research by Bain&Co, just a 5% improvement 

in your retention can boost your profits by anywhere from 25% to 125%."

In Growth Hacker Marketing, we should be thinking about customer retention and the potential lifetime value of a customer from the very beginning.  A customer, mind you, that you've worked hard to attain and probably spent money to gain.

I think about a primary term used in Growth Hacker marketing, Product/Market Fit.  Have you really achieved PMF if your product or offering can get new users or customers but can't retain them?  If you have high churn rates, you're leaking customers as quickly as your acquiring them.  If that's the case, it sounds antithetical for marketing teams to have meetings about the next "viral" marketing strategy. No, it doesn't sound antithetical, it is antithetical.  How can you attain viral growth if you lose users at the rate you gain them?

The churn rate or fixing the churn rate should be sending the entire team back to the drawing board to address the problem before the word acquisition is muttered again because something suggests that you don't have PMF.  Hopefully this can be discovered while you're in still in your testing your product or offering with your minimum viable product (MVP).

To me, the value of growth hacker principles and growth hacker marketing and where it distinguishes itself as a better way is that we are ok with admitting and actually seeking ways to reveal how our product or offering sucks and jumping at the chance to attack the issue to fix it.  It's not about being ok with taking a crap product to market simply because that's what we were hired to do.  It's also about the entire team collaborating and recognizing crap and fixing it as the goal of taking a great product or service to market.

In a previous blog post, I shared a recent research brief that suggests user engagement is becoming a greater focus by marketing executives.  But placing value on customers and users is not an after thought or separate thought for growth hack marketers.  Growth hackers build that into the product, offering and marketing from the start.

A few days ago, Popcorn Metrics shared a great blog post that offers 5 Customer Retention Strategies to Increase Growth that I would offer as a must read for anyone that's responsible for growth or on a team that is.

This all reminds me of a meeting I was in a few years ago with the team of a young consumer product start-up.  They were an eCommerce based business and the conversation was about marketing and their SEM spend. Through the course of the conversation, one of their team members, very casually, stated that they were aware that their eCommerce shopping cart was wonky and was probably causing some failed transactions.

After this was said, I looked around at their team for some sort of reaction, but nothing, they just went on talking about ad spends and projected budgets.  Needless to say, I was a bit shocked.  Did I just hear that right?

Now, here's were a growth hacker may think differently then a traditional marketer.  If I were there as a regular marketing consultant, I could have easily dismissed the fact that they had a broken shopping cart and just focused on getting a big ad budget out of them.  After all, website UX is not my responsibility as a marketer, right?  That's the dev team, right?  But I just can't roll that way.

When I got the chance to speak, I could not help but ask why they were even talking about an Adwords spend when they knew they had a broken shopping cart?

If the idea is to continue running search ads with a broken cart to keep building awareness while you work on it,  then go in the corner and think about that.  While it may be creating awareness, it's building awareness of a bad UX!

But here again, as I stated at the start of this post, it's so easy go myopic and focus entirely on customer or user acquisition that the obvious is missed.  A broken shopping cart is just as much a part of the conversation of growth as is an ad spend.

Check out the 5 Customer Retention Strategies to Increase Growth that I shared above and I look forward to sharing more about exploring the inner growth hacker next time.

Are Marketing Execs Starting to Thinking More Like Growth Hackers?

A new research brief came through my inbox a couple of weeks ago.  In the past I probably would've read a research brief like this and found the information interesting.  But reading this new brief now, through the lens of a Growth Hacker, I see the insights of the report a bit differently.

Pulling from this research brief called Marketing Morphing from Expense to Revenue; Measured on ROI, it

was blindingly clear that marketing executives are starting to hear the message of marketing that Growth Hackers, by the nature of who we are, hold true to.

Now, in the brief, the term ROI is used extensively and we can make a safe assumption that ROI is being measured largely by revenue, as the title suggests.  But, in the early stage of a start-up or a growth company, ROI can be associated with the milestones and objectives of the phase they're at.  I would even suggest that KPIs for an established brand or company can also be measured as an ROI as long as it moves the company towards some established growth goal with that growth goal having an impact on revenue.

So let's go through this research brief and see what it tells us as Growth Hackers.

• According to the Economist Intelligence Unit’s survey of high-level marketing executives worldwide, more than 80% say they need to restructure marketing to better support the business. And 29% believe the need for change is urgent.

Yes, I think just about any Growth Hacker that's been operating outside of the traditional marketing world can agree that this change of thinking is urgent.  As Growth Hackers, we realize that if it does not drive or contribute to growth and isn't track-able and measurable, it's not something that should consume resources of staff, energy or budget.

• Marketing will increasingly be seen as more of a source of revenue. The proportion of companies where marketing is viewed as a cost center will dwindle and the number where it is seen as a driver of revenue will grow. In three to five years, survey respondents say, approximately four of five companies will classify the marketing function as a revenue driver.

The very nature of a start-up or growth stage company does not allow for anything to be a "cost center". Avoiding cost centers is pretty much the purpose of Growth Hacking.  Growth Hacking also does not view marketing as a separate center but is organically part of the organization as a whole.  Marketing is baked into the product and business from the beginning and operates in parallel with the development or engineering teams right for the start to develop a product that fits your market to where the marketing, while it may seem organic, is well planned and tested to fit the market they're shooting for.

• The customer experience is increasingly seen as a key to competitive advantage in every industry. Slightly more than one-third of marketers polled say they are responsible for managing the customer experience today. However, over the next three to five years, 75% of marketers say they will be responsible for the end-to-end experience over the customer’s lifetime.

I would bet you that if you ask any Growth Hacker or successful launch company that used Growth Hacker Marketing would tell you that customer experience is what it's all about!  When you read this finding from the research brief, you almost have to wonder what marketing executives are thinking.  The customer and growth of users is the lifeblood.  It's well stated in the Growth Hacker community that Every Failed Start-Up Has a Product, What Failed Start-Ups Don't Have is Enough Customers.  Knowing that, if your're not thinking about your customer or the customer you're trying to obtain,  what in the world ARE you thinking about?

• A marketer’s greatest achievement is an engaged customer, says the report. Because an engaged customer keeps coming back, engagement is defined most often in terms of sales and repeat sales. 63% of marketers polled say that engagement is manifested in customer renewals, retention and repeat purchases. Adding in the 15% who see engagement in terms of impact on revenue, a full 78% of marketers see it as occurring in the middle or later stages of the classic funnel. 22% view engagement in terms of love for a brand; important, but part of marketing’s legacy skill set.

Everything from the cost of customer acquisition (CPA) to the viral coefficients (K) needed for viral growth hacks to the lifetime value of a customer is dependent on the engaged customer.  A product or business without engaged users or customers is missing a big part of Growth Hacker marketing.

• 39% of marketers want new blood in the two areas of digital engagement and marketing operations and technology. A close third, and not significantly different, 38% want skills in the area of strategy and planning.

A simple response to this would be to find and hire more committed Growth Hack marketers.  Seems pretty clear to me.  Maybe the bigger message from this is that marketing executives are realizing, by seeing the success stories all around them of massively successful product launches, that there is a better but still elusive way of doing things.  Maybe we need to begin an organization like Big Brothers where we match a Growth Hack marketer with a marketing executive so the Hacker can mentor the Executive and to show them a better way in a safe and understanding environment.

When Marketing Case Studies Can Harm Your Business

Case studies are a great resource for any start-up or business that's trying to achieve traction and growth.  I will be share case studies that feature growth hack marketing often as well as other case studies to show the hidden growth hacks within.  While a case study may not specifically feature the growth hack, chances are there is a hack or two within a successful case study.

Here's my Caution Label Concerning Case Studies

Good case studies can teach us a lot and a well written case study can reveal a growth hack that we can take, learn from and replicate it to our benefit.  A good case study can provide time-saving insights to a growth hack that has already proven itself.

But, taking action and trying to replicate the overall message of the case study can only work if all the other elements of growth hack marketing and a growth hack minded team are present. Like with any recipe, you need to have all the ingredients in place to replicate the outcome.

I recently had a coffee shop meeting with an early stage tech start-up and this error soon became clear.  While I will certainly point out the credit they deserve for putting together a short list of marketing ideas that they felt could work, I soon realized that it's also important for the team behind the product to evaluate who.  Was their product and team able to execute growth hacks.

Trying to apply growth hacks without holding true to the other principles of growth hack marketing may lead the team to a failed attempt without realizing that the failure was inevitable.  Not because the hack was bad, but because the foundation was not in place.

Are you thinking like a growth hacker and are you staying true to growth hacking?  Have you applied the principles of Product Market Fit?  What are you trying to achieve by the hack and is it the right hack at the product stage you're at?  Are you looking for a hack to provide feedback to your team during a minimum viable product (MVP) stage of your product?  Are you even at that stage or aware of what it is or why you need it?

If you are looking for feedback, have you planned out how you're going to gather that feedback, measure it and evaluate it?

My fear is that many well intended product developers may take the overall idea of the case study and attempt to apply it by jumping right to the final traction phase of their business.  When failure is achieved, the tragedy is to walk away from the experience thinking the hack does not work when, in reality, the hack was not the right fit for the product or business or for the stage it's at.

I certainly don't want to imply that I'm discouraging start-up teams from going through the exercise of researching case studies and putting together a list of possible ideas.  In fact, this is exactly the approach I would encourage.  You can learn more about how to use this exercise, check out Traction by Gabriel Weinberg and Justin Mares.  You can find the link to this book in my resources section.

Use Case Studies the Growth Hacker Way

In their book, they walk Start-Up teams through a process they call the Bullseye Framework.  No this isn't something you can get a Target, it's a process a collaborative process that a team can go through to identify the channels that will get them the traction they need for the stage they're at.  From the initial brainstorming sessions through ranking these channels, prioritizing them, testing them and focusing on what works and repeating the process.

So, case studies can play an important part of a traction phase for a hacker start-up, but they need to be applied within the mindset of team that is applying them using a process that can deliver the desired results.  Ironically, the desired result is not necessarily a home run on the first swing.  While this may sound a little crazy, it's important to understand that the hacker mindset is focused on failing fast to find what does and does not work and to avoid wasting time and budget on things that sound great in a case study but do not fit for you product or team.