• Conversion Optimization vs. Customer Retention Optimization : The Ultimate Goal

    a cartoon image of a laptop screen and magnifying glass looking for conversion opportunities vs a customer trapped in a glass cup depicting retention.

    If you are a marketer, optimizing for conversions is probably etched in bold in your job description. After all, getting users to complete the desired action on your website – be it clicking on a PPC ad, filling up a form, subscribing to the blog, or making a purchase – is the primary objective. The more efficiently you can drive conversions, the more you end up saving in terms of time, money, and effort.

    Needless to say, every little tweak you make to your website to convert a visitor into a customer or a passive user into an active one, requires you to shell out money. A smartly devised conversion optimization strategy helps you acquire more visitors, increase revenue per visitor, and ultimately result in better growth. This is, however, just the beginning of every marketer’s love story with conversions. Once a visitor becomes a conversion, you must keep the loop going. Repeat purchases, repeat visits, more sign-ups on your webinars – these are the signs of an everlasting bond in the making. This is what your ultimate goal should be – retention. Are you optimizing for it?

    Why Businesses Must Focus on Optimizing for Retention

    customer retention optimization

    It is great if you can steadily keep the conversions flowing. However, driving repeat visits can result in higher profits. Imagine the cost of social advertisements, Google AdWords, and more marketing efforts that go into acquiring one new visitor. And, you aren’t even sure if that visitor will make a repeat purchase. Research, on the other hand, shows that existing customers are likely to spend 67% more than a new customer.Michael Brenner explains;

    Customer retention isn’t just about seeing how good of a job your marketing and sales teams are doing. When you track this number, you know when you’ll need to make vital changes or switch gears to reach your sales and growth objectives.

    Not to say that conversion optimization is any less important; however, focusing on retention optimization is critical to long-term growth. Listed are four crisp reasons why:

    • Declining customer loyalty: Accenture reports interesting statistics on customer loyalty. Where on one hand 54% people switched their service providers in the past one year, Accenture also reports that 66% of US consumers spend more on brands to which they are loyal. Further confirming the case for declining loyalty is McKinsey report pointing out that purchases in most categories are shopping driven rather than loyalty driven. This is a challenge that only optimizing for retention can solve.
    • Increasing competition: For every need of the consumer there are thousands of websites and more sprouting up every day. Dandy Loop, in his published statistical report on Internet Retailer, estimates that there are around 12-24 million e-commerce stores on the internet globally. Moreover, e-commerce is a trillion dollar industry. You can easily guess how much competition runs in this one single domain. But how does one beat the competition? An average player cannot. Only elite players can. And, retention is the key to becoming elite.
    • Improving CLTV: In simple words, customer lifetime value (CLTV) or lifetime value (LTV) is the projected revenue that a customer would generate in a lifetime. Increasing CLTV is a critical goal for all businesses aiming for growth. In fact, 76% of companies see CLV as a significant concept for their organization. The elements of CLTV – Cost of acquisition, average repeat transactions, average order value. While it does not impact CAC in any way, the idea behind retention optimization is that it can drive higher repeat transactions from those users who purchase more than the average order value. Additionally, stats prove that repeat customers are more profitable than new acquisitions.
    • Implied benefits of retention optimization: Your goal is to get your customer to advance from the stage of satisfaction to extension, and ultimately to advocacy. If your existing visitors become brand advocates, they are likely to bring in new customers for your business. Tamar Weinberg explains;

      Social media marketing is an effective way to deepen your relationships with existing customers and persuade them to continue using your solutions into the future.

      The social influence of advocates driving new users for your business is a boon. You don’t need to then shell out huge amounts on driving new visits through Facebook, Instagram, or Google ads as your advocates are doing that for you on goodwill and trust.

    Retention Optimization – Where to Get Started

    retention optimization

    Everyone has made the mistake of focusing on all existing customers rather than the profitable ones. But wouldn’t you as a marketer agree that it is rather beneficial to steer your efforts on milking the users with a higher worth? What would be your pick: 1) 10 customers worth $1000, or 2) 1000 customers worth $10?

    Remember the 80/20 principle: which states 80% of your profits flow in from 20% of your customers? Your goal should be to focus on and retain that 20 % of customers. These are your high value, high impact customers. Keep your focus on them or you will be leaving money flat out on the table.

    How to identify high-value customers

    Knowing who your high-value customers are can help you steer your retention efforts in the right direction. Centering your budget and sensibilities around this set of customers can help yield a higher ROI. Tracking numbers on the very specific metrics using analytics can help you identify this set of customers easily. By and large, these metrics include:

    Purchase frequency

    This is the average number of times a customer purchases within a given period of time. Frequent purchase activity suggests that it will be easier, and obviously more profitable to retain this audience. Mine your customer list and look up your sales data to identify customers with high purchase frequency. Kirsten Burkard explains;

    Your repeat customer rate is the backbone of retention marketing. It measures the percentage of customers willing to make a second purchase from you. Measuring your repeat purchase rate is an excellent way of evaluating how well your retention strategy is actually working. The higher this metric is, the more willing customers are to return to your store!

    Analytics and business intelligence tools help understand complex consumer buying patterns, cycles, as well as triggers. For example segment of frequent purchasers can be identified based on empirical evidence with a hint of common sense. Once this segment has been identified, profiling can be done to build an ideal customer profile.

    Actionable tip for retargeting: It is even better if you are able to analyze the time between purchases. If you know that a buying time between purchases for a typical customer is 5 to 7 weeks, you can frame your retargeting strategies based on this customer behavior insight. Your promotional email campaigns can be planned according to this gap between purchases.

    Average order value

    As implied, this is the average value of an order of a customer. Those customers with a comparatively higher order value need to be retained.  Segments can be created based on visitor behavior. For instance, creating segments for less than average, average, and oligarchs can be created by using data from analytics. You can then track the behavior of this segment to get an idea of what motivates them to purchase, see if there is any similarity in their browsing and search pattern on-site. In fact, you can also check what sections on your website get the most attention from oligarchs with the help of tools like heatmaps.

    FigPii Heatmaps

    Actionable tip for retargeting: Dig into demographics data to find out more about your money-making audience. If you know that most of your high order value customers lie in the age group 25-35, you could build your marketing campaigns for this set of audience. Moreover, if you are able to analyze where this set of audience hangs out the most – Facebook, Twitter, Instagram – you can run your retargeting campaigns on those channels.

    Price Sensitivity

    Evaluating your users from the perspective of sensitivity to fluctuation in pricing can help you shaft the loyal persons from the rest. Bargain hunters will always eye offers, freebies, and discounts. On the other hand, high-value customers aren’t likely to be influenced by price fluctuations.To differentiate the loyal persons from others in the lot, you might need to work the other way round and identify the price-sensitive users. Dig out those users through your quantitative and qualitative data on who increased purchase frequency during discounts or offers. This will give you a broad idea about the bargain-hunting audience.

    Action tip to retain non-bargain hunters: Your high value non-price sensitive audience is looking for a promise beyond price. They will stick around if they trust in the quality of your product and services. However, everyone loves a bit of attention. Personalization can help you turn them into valuable lifelong customers. Send them personalized offers based on their likes and tastes and see them fall for you head on heels.

    How to identify high impact customers

    In layman(ish) language, a high impact customer can be defined as someone who not only brings in more money but also advocates your business, influences others into making purchases from you, thus becoming a part of word-of-mouth marketing of your business. For a better understanding of the perceived and actual value of customers, take a good look at the image below:

    ImageSource: Highimpactcustomers

    High impact customers bring with them a promise of potential new users. Smart investment into keeping these users happy ultimately means they pull in more business for you without you spending huge sums of money on the acquisition. Pays well, doesn’t it? Here’s how you can identify high impact customers:

    NPS scores

    Net promoter score surveys help find out who your promoters, passives, and detractors are. The promoters form the set of people who can create a positive image for your brand and drive in more business for you.

    Actionable tip: Once you identify the promoters, build your marketing campaigns into driving more engagement from this set of audience. Ask for continuous feedback on the purchases. Send them to refill/restock reminders on perishable items such as grocery. Dig deeper into finding out what made them give you a good NPS score.

    Social Influencers

    These are people who have a large social media following. When such a user buys from you and appreciates your product or service, it smells opportunity!

    Actionable tip: Ask for reviews or to be featured on their social media accounts. Their Instagram accounts would have thousands of fans or their blogs would be read by people throughout the world. Express your thanks with a personalized gift beautifully gift wrapped. Flaunt the product that an influencer purchased from you or the good review they shared about it, on your business’s social pages. All these initiatives will help drive more traffic and potential buyers.

    High impact and high-value customers are the rich lodes of your business. Keep them happy and you’ll never see the growth graph dipping.

    Interacting and engaging beyond conversion

    Having identified the audience that you wish to optimize your retention strategy for, you need to device tactics that drive incremental sales, encourage repeat purchases, and foster long-term loyalty. Let’s get started:

    1.Transactional messaging 

    Don’t leave the customer alone and lost after he or she completes a purchase. Drop in a thank you note with a link to more ‘similar products on the website’. You could experiment with so many elements – asking users to rate purchase experience, nudging them to save their information for a future purchase. The idea is to get the user to add more to the basket in a single visit. You could use any means – email or push notifications, to send out your transactional message. Nadav Dakner explains;

    Empower your customer to achieve their goals. Guide them on the path with targeted, inside information. Highlight their successes. Ask for their feedback and prove that it makes a difference. By putting more power in the hands of your customers, you’ll keep them coming back for more.

    Example: Look at this transactional email from Dollar Shave Club. It is a simple welcome to the dollar shave club note with a nudge encouraging referrals. The strategy is smart as it will benefit the buyer only when he makes another purchase. 

    Image Source: transactional emails

    2.Post Sale Messaging

    Once the order has been delivered to the customer, a sale is said to be successfully completed. Is your job done at this point? The answer lies somewhere between yes and not quite. What your objective should be is to bring these customers back to purchase from you again. Asking for feedback on the product, sending them replenishment reminders, or reaching out to them with relevant cross-sell offers can bring them back to your website and even get them buying again!

    Example: A hypothetical example would be if you’ve recently sold tribal silver earrings to a customer, you could send an email with a link to videos on ‘how to rock in tribal jewelry’. Within this video, you could embed advertisements to offers available on tribal necklaces. Here’s how Rapha has cracked post sales messaging. Crisp and to the point.

    Image Source: reward stream

    3.Delight with on-site experience. Every single time

    Scaling up on user experience when the user is on-site is a prerequisite to keeping her coming back. Study the user on-site behavior, analyze drop-offs and remove friction. This goes for all businesses – eCommerce, travel, and even SaaS. Moreover, all elements of an on-site experience should focus on delighting the user – be it her on-site journey from the search to checkout, the load time of your website, or the visual appeal of your website. The overall experience matters.

    Example: Have you ever stumbled upon this extremely user-friendly website while looking for kitchenware or appliances? Its search functionality with autofill makes it so simple to find what you really want. Or all the UI elements nudging the visitor towards the button you really want them to click. If you are looking for more tips and suggestions on improving the onsite search experience, this blog post by eConsultancy.com has it sorted for you.

    4.Connect with the emotional side

    Leveraging emotional motivators is a sound strategy to encourage sales, repeat purchases, and ultimately foster brand loyalty. If you are able to connect and fulfill the emotional needs, wants, as well as instincts of your consumer, you have her for a long, long time to come. According to Harvard Business Reviews (HBR) research, “It’s possible to rigorously measure and strategically target the feelings that drive customers’ behavior. The following diagram explains these emotional motivators as defined by HBR:

    Making such deep connections where the customer starts truly identifying with the brand is a big challenge. Done well, it could take your customer relationships to incomparable heights. Brands that are excelling at leveraging emotional motivators include Dove, Disney, Apple, Rolex – to name a few.

    Example: Social proof or trust is one of the most important and widely leveraged emotional motivators. All business websites – SaaS, finance, travel, eCommerce, and so on use it to connect with customers. Where SaaS websites use testimonials and logos to instill trust, eCommerce and travel industry is getting innovative and using onsite notifications to win over user confidence. Use Booking.com to search for hotels, and they will show you notifications with the exact number of times a room or hotel was booked or viewed. This ‘showcasing’ of user actions instills trust in those visiting the site for making a booking, which translates into a favorable action.

    5.Create a retention loop

    Gamification has taken retention to the next level. The idea is to keep customers coming back to your website. In this sort of an arrangement where the goal is to create a retention loop, active users play a role in pulling the inactive users back into browsing and buying.

    Example: Linkedin is doing this beautifully. Active users endorse others, in return soliciting endorsements. It’s a loop that encourages continuous activity.

    FigPii Heatmaps

    6.Building habit-forming products or experiences

    Have you read the famous book Hooked by Nir Eyal? This gem of a book addresses most of your doubts on how some companies succeed at creating such sticky products that are hard to give up on. Habit formation is indeed the key to cracking retention. Habits build into the routine of your consumers and hook them into engaging with you constantly.

    Example: Snapchat and Whatsapp are now no longer just products, they are a lifestyle. Such is their charms. Because you are aware that a swarm of people hangs out here, you can run your retargeting ads on these social media platforms luring users back into browsing and buying, with the assured influx of traffic from these sources. It is interesting how Instagram shows you an ad based exactly on what you were browsing on Facebook. Social media retargeting has become damn neat and up to the point. It’s an addiction that they lure you into.

    To Wrap Up

    While finding and targeting new customers is always a top priority, successful businesses realize that retention optimization is keeping their boat afloat in the long term. If it was not just about conversions, it was always about getting a higher return on investments. And even if you are successfully lowering your cost of conversions, you are still doing only half the job. Without an effective retention optimization strategy in place, you are only finding and guiding your business on its way to a financial and professional grave. Khalid Saleh, CEO at Invesp, puts it this way:

    Heck, if you want to increase conversions, make everything on your site absolutely free, and you will reach 100% conversion. But you will also go bankrupt.


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