Retention.
Best of Blume’s content in your inbox.
In the competitive consumer tech world, improving user retention is critical for long-term success. In this edition of Blume Beacon, we uncover what it takes to increase user lifetime value (LTV) and reduce customer acquisition costs (CAC).
We break down the key levers of user retention and provide practical advice to increase LTV effectively.
Whether you're just starting out or refining your existing retention strategies, this is a must-read!
----
Before we start, here’s a disclaimer: there’s no one-size-fits-all approach to user retention. However, returning to the basics can help.
A good place to start is to use chart below to decide what’s working, what’s not, and make decisions accordingly.
Controlling User Experience
Monitor Platform Experience
Platform usability: Ensure all user flows work properly. A glitch at the payment gateway or subscription page can deter users from returning.
Delivery experience: Maintain committed delivery timelines. If it's a problem, do RCA and fix it first before trying any other ways to improve retention.
Monitor Customer Feedback
You can make consumer calls for qualitative feedback or send optional surveys. The 2 most common surveys are:
Product feedback: Satisfied customers will return. Collect product experience feedback consistently.
Customer service interaction feedback: Whether human reps or chatbots, ensure the best experience for users. Keep developing operating procedures to delight customers.
Controlling User Acquisition
Acquisition strategy promises value before purchase and retention measures how well you deliver on that promise.
Breakdown by product
Run maximum acquisition campaigns on high user retention products or services.
Here’s a 2x2 matrix for reference.
Breakdown by acquisition platform
Customers from platforms like Google search, App store search, and shopping are more likely to use your products, with higher retention. Do not overindex on channels with lower retention.
If the acquisition channel has high volume but low retention, check your ad’s narrative before giving up on the platform.
Breakdown by acquisition narrative
The simple thumb rule is that your ads must set the right expectations or they will fail. It's important to monitor them closely and tweak the narrative to set proper expectations.
If ad narratives drive poorer audience quality, stop using them.
Marketing Strategies
Your marketing strategy depends on marketing channels and the content + user segmentation strategy used on each channel.
The most commonly used channels are:
WhatsApp: Consumer brands often use WhatsApp, but you’ll need to follow a few steps. First, create an account with a WhatsApp Business Service Provider (BSP) like Gupshup or Wati. One phone number can only be linked with one BSP. After that, upload messages and wait for approvals before sending messages. The CTRs on WhatsApp are among the highest.
Push Notifications: They're one of the most effective ways to stay on top of your customer’s mind. Consider WebEngage, Clevertap, or MoEngage for push notifications.
SMS: Despite losing its popularity, SMS remains effective. The Government made it cumbersome to send SMS to reduce spam. You’d have to register a header with a DLT provider like Airtel, VI, or Jio, upload messages, wait for approval, and use SMS platforms like Gupshup to send to your consumer.
Emails: Few read them, but those who do are more likely to purchase. Platforms to consider include Mailchimp, SendGrid, or Mailmodo.
Retargeting via performance marketing: Upload your customer list on Meta or Google to run ads and bring users back. Consistent results may require an audience of 100K+ users.
Outbound telecalling: This channel has poor results, compared to others, as most customers don't answer calls from unknown numbers, making it not scalable.
Integrate all channels to your marketing automation platform like WebEngage, Clevertap, or MoEngage.
Incentives
Platforms offer incentives like discounts or loyalty program benefits. A rough chart looks like this:
Discounts
Blanket discounts: Give a coupon code to every user to encourage repeat orders. Avoid heavy discounts without smarter segmentation.
Cohort-based discounts: Some customers need more discounts. One way is profiling them by Recency, Frequency & Monetary value (RFM). Another is to segment users by product, acquisition source, customer experience, etc.
Cashbacks: Cashbacks in an app wallet encourage users to return. They can be given on every successful purchase or by gamifying the experience. Expiry dates make cashbacks more effective.
Loyalty Programs
A loyalty program is a structured rewards system to increase customer loyalty and understand their behavior with data.
Free loyalty programs: Think of credit card rewards points or Tata Neu coins. These accumulate regardless of purchases. Some platforms have usage-based programs like Myntra Insider, which assigns tiers based on purchase history and offers additional benefits.
Paid loyalty programs: A few platforms like Amazon Prime, Zomato Gold, and Swiggy One offer value-added features for a small price to encourage customer loyalty.
In Conclusion
LTV/CAC is one of the most important metrics tracked by consumer tech companies. Boosting a user’s Lifetime Value (LTV) and reducing their Customer Acquisition Cost (CAC) improves a platform’s economics. Focusing on user retention helps achieve this.
To go deeper into the article by Marmik Mankodi, Blume’s investment team member, check it out here.