The rise of retention marketing and how not to make it a mess

Key takeaways:

  • Retention marketing gained prominence due to rising acquisition costs and a growing focus on customer lifetime value.
  • Key drivers include increased competition, escalating expenses, and the prevalence of subscription models.
  • It’s essential for both traditional and subscription-based businesses to prioritize customer retention.
  • Marketers and CX specialists face challenges in managing multiple campaigns effectively.
  • Implementing customer journey maps offers a solution by simplifying the tracking and optimization of retention strategies.

Retention marketing used to be only an afterthought – everyone’s focus used to be narrowly on customer acquisition: the more customers you acquire, the more customers you have. It was presumed that all consumers and companies who purchased from you once were perfectly familiar with your whole offering and would be more than happy to come back. Therefore, there was no motivation to care about them further.

The rise

The shift came in the late 2010s when the companies started putting more and more importance on “milking” their current customers. There are 3 main drivers behind retention marketing’s rise in the importance ladder:

Customer acquisition costs

As a consequence of competition growing in all fields customers had seemingly endless choices and getting their attention and eventually winning their affection (that’s quite a verse!) was gradually getting more and more expensive. And you can only go so far trying to outbid your competitor’s PPC bids – there’s simply a point beyond which it doesn’t make sense.

Lifetime value

“Wait, why are we spending all this money to sell our products to new customers when we already have customers who can buy them?” That’s what was probably said during the many aha moments at that time and the customer’s lifetime value became a thing. Until then, the customer was someone who came, bought something and went away – alright, maybe he didn’t go away, but that’s how it was looked at. Companies realized that the value of the customer isn’t only in what they can buy right now, but also in what they will be able to purchase in the future, right until their last day in this world (or until the products or services of the company stop being relevant to them).

The rise of subscription models

The third pillar upon which retention marketing was able to stand up straight is the rise of the subscription model. Think streaming services like Netflix or Hulu, subscription boxes like Birchbox or e-commerce subscription products like Dollar Shave Club, and many online SaaS products. Even Adobe started offering their portfolio in a subscription plan and BMW famously faced backlash for offering the owners of their cars heated seats for a monthly subscription fee. 

Churn rate (the number of customers who don’t renew a subscription service represented in percentage points) became a bogeyman for marketers and customer experience specialists. In the subscription model space, customer acquisition is just an initial phase. What really counts is the ability to retain the customer – having customers subscribed for a month or two isn’t worth much.

The mess

Retention marketing thus makes sense for both companies selling traditional products and services and companies with subscription-based products and services. The first group is trying to make sure the customers will be coming back for more purchases while the second is trying to prevent their customers from unsubscribing.

Even a slight improvement (we’re talking single percentage digits, sometimes even fractions of a single one) can make a huge difference and generate or lose significant amounts of money. It puts a lot of pressure on marketing and CX people who are consistently running many different campaigns and experiments in the hope at least some of them will win them the desired percentage points.

That’s why retention marketing often becomes very messy and complicated to keep track of. The best solution is to visualize the campaigns and experiments in a customer journey map. It’s a simple way to record the retention marketing efforts and have them available for the whole team to see and analyze.

Seeing it all together will give your team a higher perspective of what it’s trying to accomplish and perhaps even lead you toward some ideas about what campaigns to try next.

Do you want to create an interactive and easy-to-use customer journey map with powerful touchpoints, personas, automatic KPI import & monitoring, and much more?

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