Digital Marketing Optimisation: Part 4 - Retention

The classic digital marketing processes are acquisition, conversion and retention and so far in this series on digital marketing optimisation I have been looking at the components of successful optimisation strategies when it comes to acquiring traffic on the site and then converting it. In this final part of the series, it’s time to look at optimising retention marketing activity.

My own definition of retention marketing is:

“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 buy again (or whatever the conversion action is) 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.

But somehow “retention optimisation” doesn’t quite sound right and I prefer to think of it in different terms. What we are trying to do once we have acquired a customer is to optimise their lifetime value and so I tend to think about this process as “customer optimisation”. How can I optimise the return on the investment that I have already made in acquiring that customer in the first place? What data, tool, technologies and processes do I need?

Classically we tend to think of email when it comes to retention marketing channels and used well it can be a powerful retention tool. However once you have transacted with a customer there are multiple touch points that can be used to increase the chances of them doing business with you again; the call centre, the store, the site etc and what is required is a view of the customer that straddles these multiple channels. This much easier said that done, especially for organisations with legacy systems that have been developed over the years. Often data on customers can sit in a number of disparate systems and it can take 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 what you then do with it is pretty important as well. As I said earlier, what we are trying to do here is 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”. 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 out the right kind of messages, whether it is in an email or on the site. Segmentation is a way of increasing relevance. Personalisation is a way of increasing relevance. These techniques, which may be manual or automated, are leveraging the insight that you have about someone to present them with more appropriate and relevant. These techniques do not necessarily have to be sophisticated to be effective, and in the early days of your customer optimisation programme being over elaborate can undermine the process. Remember, a key component of any optimisation programme is to have the ability to execute. That means that you need to ensure you have the processes and tools in place which allow you to act, measure and react.

For example, if you decide that you want to improve relevancy by having a segmented email marketing programme instead of having a single email that goes out every month then you’re probably on the right track. However, if your resources and processes are geared up around just sending out on version of one email every month, then it’s going to be a major step up to implement a segmented email marketing programme whereby different groups of customers will get different versions of different emails at possibly different times. You will need to have a more sophisticated email systems that can handle segmented email marketing programmes, your database will need to be more extensive and robust, you will need to invest in more copy and creative material and your processes will need to be more rigorous.

So it will pay to walk before you start to run and to look for the low hanging fruit. In terms of customer optimisation, I think that the most critical point is getting someone to make the second transaction. Generally there is a “friction curve” that needs to be managed. The steepest part of the curve is in the early days of your customer relationship. The more times that someone has transacted with you the more likely they are to do it again in the future; the friction isn’t as high. Getting them to repeat for the first time is the hardest part. So this is a special case in the programme and is when timing can be vitally important. The time when people are most likely to transact with you is just after they last transacted with you, so for this special group all about “recency”. The time to get them thinking about the next transaction is just after the first.

Ultimately profitable businesses are built on profitable customers and repeat customers tend to deliver the majority of the profit. Acquisition and conversion optimisation are essentially components of a success marketing programme but optimising long term customer value is key.

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