Plugging the Leaky Bucket: Reducing Customer Attrition

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We kicked off our Leveraging Retention to Optimize Customer Acquisition by emphasizing the importance of focusing on retention mechanics in addition to just new customer acquisition. In our most recent posts, we’ve discussed how to increase the overall universe of buyers as well as how to increase the lifetime value of each customer relationship. Today we’ll focus on arguably the most important piece of the puzzle: preventing customer churn.

The “leaky bucket” problem is frequently discussed in the customer retention world: now that you’ve made significant and timely investments in acquiring valuable customers, how do you make sure they don’t stop buying?

Here are 5 quick tips to plug your leaky buckets and drive strong ongoing customer retention:

  • • Personalize – Just as personalization can be incredibly powerful for activating new customers, it can be equally valuable for retaining customers. Personalization gives way to stronger user experiences that ultimately result in improved stickiness and increased brand loyalty. (Note: we mean really personalize; we’re not just talking about inserting a first name into a subject line. Truly effective personalization extends well beyond attributes like demographics, recency and frequency and looks at behavioral data, device information, etc.)

  • • Ease into your cadence – If any metric is consistent across our client base, it’s that customers are most likely to opt out of emails in their first 30 days as subscribers. Because average revenue per user (ARPU) for an opt-in is materially higher than an opt-out, mitigating the risk of opt-outs is very important. We recommend that brands treat customers a bit differently in their first 30 days: slow down the typical sending cadence and really focus on your points of difference (perhaps even an activation series?) in new customers’ earliest days.

  • • Solicit feedback along the way (and use it!) – Customers want to be heard, plain and simple. Solicit feedback from your companies both proactively and reactively and better yet, keep them in the loop as you implement their suggestions (hence all of those “You asked, we listed…” subject lines). Remember, you can collect feedback both online and offline; it turns out that direct phone calls often prove to be one of most effective win-back channels!

  • • Build loyalty programs – In addition to improving purchase frequency, loyalty programs do precisely what they promise: they breed loyalty. When there are points or rewards on the line, customers will be substantially less likely to churn.

  • • Opt users down, not out – When a customer clicks the “unsubscribe” button, she may be opting out due to disinterest, but more likely the opt-out is a function of too much email.  As always, marketers should respect the user’s preferences, but too many marketers take an “all or nothing” approach to doing so.  An opt-down strategy presents a happy medium – allow the customer to receive just a little less email.  One of our clients, OpenSky, was recently able to reduce overall opt-out rates by 12% by rolling out a well-strategized opt-down strategy, and we suspect you could do the same!