Retention marketing is a marketing tool that aims to build ongoing relationships with existing customers, such as repetitive and long-term contracts
In the first place, the purpose of marketing in relation to customers can be broadly divided into two perspectives: “acquiring new customers” and “building relationships with existing customers.”
In particular, retention marketing falls under the latter category, which is facing a declining population, it has become difficult to acquire new customers, and with the birth of subscriptions and SaaS models, consumer behavior has
become more familiar and experiential. .. The shift is once again in the spotlight.
In this article, we’ll discuss the importance, concrete methods, and key points for success in order to understand retention marketing from scratch.
- 1 Why retention marketing is important to businesses
- 2 What to look for as a retention performance indicator
- 3 9 Specific Retention Marketing Techniques
- 4 Key points for successful retention marketing
- 5 Summary ｜ Understand customers from data and improve retention
Why retention marketing is important to businesses
First, I’ll explain why retention marketing is important to businesses and why they need to spend their budgets.
Retention marketing is , “improvement of LTV”, “cost-effective”, “discovery of customer dormant”, of “new customers by improving customer loyalty” can contribute from the four main aspect to the growth of companies increase. ..
Because it leads to improvement of LTV of existing customers
LTV (Life Time Value) is called “customer lifetime value” and refers to the profit that a customer brings while using a product or service. LTV is calculated by the following formula.
LTV = APRU (average unit price per user) x gross profit margin x churn rate (churn rate)
The first advantage of using retention marketing is that you can increase the variables for “APRU” and “churn rate” .
For example, if you look at a specific product on an e-commerce site, you will find “Products purchased with this product”, “What do you buy after seeing this product”, and “Products similar to this product”. Many people have seen the recommendations.
This is one of the retention marketing methods that aims to improve LTV by introducing customers who continue to purchase (upsell) products with higher price functions than products that are being considered for bulk purchase (cross-selling) or purchase.
.. It is one.
Regular distribution of campaign information, distribution of member-only coupons, and enhanced customer support to extend the continuous purchase period may be effective in increasing the frequency of purchases.
Because it is more cost effective than acquiring new customers
Retention marketing is generally a cost-effective (ROI) metric compared to new customer acquisition . One of the marketing ideas is the “1: 5 method”. The rule is that acquiring new customers costs five times as much as existing customers.
To acquire new customers, it takes a long time to finally receive an order, such as training activities to get to know the company’s products and services and raise interest. It also costs money.
Existing customers, on the other hand, may already be using their products or services or have some interest in the past. As a result, it doesn’t cost as much as acquiring new customers to facilitate repurchases and contract renewals.
Of course, acquiring new customers is also very important in management strategy, but if marketing measures are taken under the same cost and man-hour conditions, it is more cost-effective to approach existing customers than new customers. There is
an aspect that is easy to obtain.
Because you can dig up dormant customers
A “diapause customer” is a customer who has purchased a product or used a service in the past, but has not purchased or used the service for a certain period of time.
Dormant customers are customers who have been interested in or interested in their products and services in the past and have made purchasing decisions. Therefore, we have the potential to become a good customer in the future by investigating the
cause of the bottleneck and proposing a solution to why we stopped using it.
For example, measures such as providing careful support for functional aspects and usage to corporate customers who have decided to introduce a business efficiency tool but have quit using it because they do not understand how to use it, and distribute
usage examples as content. By using, you can increase your motivation to use it again.
In addition, retention measures may be taken, such as using MA tools to segment customers who have not logged in to the service or purchased products for a certain period of time, and to send step mails to encourage them to return to use.
Improving customer loyalty makes it easier to acquire new customers
Customer loyalty can also be expected to improve by promptly enhancing the support system and improving the convenience of the service itself. Customer loyalty is the credibility and attachment that a customer has for a particular brand or service.
Improving customer loyalty not only raises the “purchase frequency” and “purchase unit price” of customers, but also contributes to the acquisition of new customers. A typical example is the occurrence of positive reviews.
We found that many loyal customers recommend brands and services around them. One sports maker has also shown that 85% of customers with high customer loyalty recommend sports makers to their surroundings.
In addition, many readers may have written reviews and reviews of products on EC sites such as Amazon and Rakuten. If these reviews and reviews are good, they will definitely make a good impression on new customers.
By increasing customer satisfaction and loyalty through retention measures in this way, we will greatly contribute to the acquisition of new customers as well as existing customers.
What to look for as a retention performance indicator
From here, I will explain some elements that should be seen as performance indicators in retention marketing.
Retention rate (retention rate of existing customers)
“Retention rate (retention rate of existing customers)” is an index that measures the results of retention measures. The retention rate is calculated by the following formula.
Retention rate (%) = number of continuous customers ÷ number of new customers x 100
For example, if you acquired 100 new customers last month and 30 of them continue to use the service this month, your retention rate will be 30% (= 30 ÷ 100 × 100). Similarly, there is an index called churn rate, but this is an index focusing
on the churn side, and in the above example, the churn rate is 70% (= 70 ÷ 100 × 100).
Retention rates vary depending on the type of business, business type, and business type. First of all, let’s firmly recognize the retention rate and monitor what kind of change has occurred due to the retention measure.
Even if the retention rate improves, if the unit price per customer decreases or the frequency of purchases decreases, the soundness of the business cannot be maintained.
At that time, an important index is unit economics, which is a combination of “LTV (lifetime value of customers)” and “CAC (unit price of customer acquisition)” . LTV and CAC are indicators of how much profit each
customer makes and how much it costs to acquire one customer.
The calculation method of unit economics is as follows.
Unit economics = LTV ÷ CAC
For example, suppose that the profit (LTV) generated by one member on an EC site is 100,000 yen, and the cost to acquire one member (CAC) is 30,000 yen. In such cases, the unit economics can be calculated to be approximately 3.3.
Obviously, if CAC exceeds LTV (unit economics falls below 1), you will not be able to maintain your business in the long term, and even if LTV exceeds CAC, that number will be. If it is low, business expansion cannot be expected here either.
In order to run a business soundly
- LTV > CAC × 3
- CAC payback period is within 12 months
It can be said that it is desirable to clear the above two points.
Understanding unit economics can be a criterion for determining the adequacy of marketing costs to acquire new customers and how much deficit can be tolerated.
9 Specific Retention Marketing Techniques
From here, let’s see what kind of methods are concretely used for retention marketing.
This is a method of retaining existing customers by using email delivery. By delivering information on the functions and usage of products and services, discount coupons, campaign information, etc. to customers, it is possible to promote understanding
of existing customers’ products and services and expect repeat purchases.
It is common for companies that distribute e-mail newsletters to just keep sending e-mails. It is essential to define the purpose and goal of email delivery and continue to improve by measuring and analyzing the data (opening rate,
click rate, etc.) after sending the email, in order to achieve solid results.
Recommendation is a method of grasping customer needs based on purchase history, browsing history, attributes, etc. on EC sites, etc., and introducing recommended products and services.
It is used for up-selling and cross-selling to raise the purchase unit price and customer unit price.
In some cases, SNS is used for retention marketing. In some cases, new product introductions are explained and posted on Twitter to users.
By continuously disseminating information to customers via SNS, it will lead to improvement of customer satisfaction and maintenance of interest in products and services.
4. Push notification
“Push notification” is effective for dormant customers of smartphone apps. Push notification is a function to display arbitrary messages such as coupon information and campaign information on the smartphone screen.
While smartphone apps can be installed easily, the number of users who continue to use them is limited. The retention rate of users who have installed the app will drop to 21% after 7 days.
By sending a push notification to a dormant customer who has installed the app but has left, you can expect to return to using the app again. Compared to e-mail newsletters that require you to open your e-mail software, push notifications generally
have a higher open rate.
5. Retention ads
Retention ads are also a measure that is often implemented for app users to return dormant customers and promote the use of existing customers. By using the advertising effectiveness measurement tool and implementing the SDK in the app, you can measure
user data and place advertisements to the users of the app.
For example, we will encourage users who have not started the app within 30 days to return to the app by delivering advertisements for new events and campaign information.
6. Customer support (customer contact)
Customer support refers to the business or organization that responds to customer inquiries. After-sales follow-up after the contract is indispensable to encourage repeat purchases and continued use of the service. In addition to telephone and email,
the number of cases of responding to inquiries via chat or LINE is increasing recently.
Resolving customer questions and uncertainties not only helps improve customer satisfaction, but also helps collect customer “raw voices (VOCs)”. By collaborating with the development department and the marketing department, the collected VOCs can
be used to improve the quality of products and services and for marketing measures.
7. Customer success
While customer support has the aspect of passively responding to customer inquiries, customer success actively provides customer support for the purpose of customer business growth and success.
Therefore, we give advice to improve performance based on data such as customer service usage rate and usage status.
8. Introduction of various tools
Retention marketing tools include CRM tools and DMPs.
CRM (Customer Relationship Management) tools are translated as customer relationship management tools, and in addition to being able to efficiently manage customer data such as customer attributes and purchase history, they also have functions such
as email delivery, inquiry management, and analysis.
By centrally managing customer information, we can accurately grasp customer needs and realize optimal proposals tailored to each individual.
DMP is an abbreviation of “Data Management Platform” and is a platform for centrally managing various data stored on the Internet.
By managing data such as “customer information” owned by the company, “access log” to the site, and “advertisement distribution” with DMP, we will realize the optimum proposal tailored to each customer. It is often used for retention marketing by
synchronizing with CRM, MA tools, advertisement distribution tools, POS data, etc.
9. Holding an offline event
Recently, due to the spread of the new coronavirus infection, it has been slowing down, but offline events are also one of the effective means of retention marketing. There are various types of events, but there are exchange meetings between users,
new product experience meetings, workshops, and so on.
At user-to-user exchange meetings (commonly known as user meetings), we contribute to increasing customer loyalty by solving problems between users and deepening exchanges.
Key points for successful retention marketing
Next, I will explain the points that the person in charge should keep in mind in order to make retention marketing successful.
Gather data and get to know your customers
The first step to successful retention marketing is to know more about your customers. Based on the data, we will analyze what kind of attributes the customer has, what kind of products they have
purchased in the past, what kind of usage status they are in, and so on.
However, the most common cases are cases where the customer data itself is not collected, or cases where it is collected but cannot be used for analysis. For example, customer support or sales may not have entered customer information in CRM, data
may have been entered but data is missing, or data may be divided by department and cannot be used company-wide.
If the number of customers can be managed humanly, enter customer information firmly in Excel etc. If you have a huge number of customers, introduce CRM tools and MA tools, etc., a system that can efficiently collect customer data Let’s arrange.
Clarify performance indicators
There are various retention marketing measures, but no matter which one is implemented, the performance index should be clarified. You can visualize the soundness of your business by using the indicators such as “retention rate” and “unit economics”
explained in this article.
For example, in subscription-type businesses, there are often cases where free campaigns are implemented to acquire new members. However, even if new members can be acquired as a result of the campaign, whether or not the business has growth potential
and expansion is another matter.
It is important to understand the LTV and retention rate of the acquired customers and combine them with unit economics. Let’s see how these indicators have changed if we implemented retention measures at the same time.
Segment your customers for one-to-one marketing
Before implementing specific retention marketing measures, it is necessary to segment (classify) customers for optimal communication with each customer .
“RFM analysis” is often used for segments.
- R (Recency): Most recent purchase date
- F (Frequency): Purchase frequency
- M (Monetary): Cumulative purchase amount
By analyzing these indicators, you can identify “good customers”, “sleeping customers”, “new customers”, etc., and take optimal measures for each segment.
In addition to this, there are various segment methods such as customer age, gender, place of residence, hobbies and tastes, but in any case, if you do not develop marketing measures after considering communication strategies for each customer, it
will lead to results. not.
For example, the title and text of an email delivered to a good customer for the purpose of cross-selling or up-selling and an email for the purpose of returning to use of the service for a dormant customer should be different.
You’ll need to figure out what each customer wants and take action on a segment-by-segment basis.
Summary ｜ Understand customers from data and improve retention
In this article, I explained the importance of retention marketing, specific methods, and points to lead to success.
Marketing measures tend to focus on the number of new leads acquired and the number of orders received, but when looking at business sales, whether to build good relationships with existing customers and lead to continuous purchasing and service use?
It’s a very important factor.
Let’s get to know the customer deeply from the viewpoint of what kind of needs the existing customer has and what kind of dissatisfaction they have withdrawn from using the service, and develop the optimum retention marketing for each customer. ..