Are your acquisition efforts the root of your retention issue?

Here are three ways brands can identify and market to the right customers while also reducing churn.

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The issue of customer retention comes up in nearly every conversation with colleagues in a service business or software company. As companies aspire to transition to an ongoing customer relationship and recurring revenue model (versus traditional transactional relationships with customers), retaining high-value customers is more important than ever.

After all, depending on what industry you’re in, acquiring a new customer can cost your company up to five times more than retaining an existing one. Moreover, increasing customer retention rates by just 5% can increase profits from 25 to 95%. These factors have helped to give rise to major investments in optimizing customer journeys and customer base marketing, as well as establishing new roles such as “customer success managers.” With so much at stake and so much focus on retention, why then, on average does the typical American business have a yearly churn rate of 15%? Why are so many companies losing customers?

Based on my experience, a major driver is that companies are often targeting the wrong customers to begin with. Year after year, we see companies set themselves up for expensive churn issues by trying to serve anyone and everyone who they can convince to choose their product or service, rather than focusing on their most valuable target customers. In my experience, this type of fire, then aim approach is one of the biggest drivers of churn, negatively impacting Customer Lifetime Value (CLV) and ROI for sales and marketing investments.

My churn story

My first lesson around this came earlier in my career when I was vice president and general manager of T-Mobile’s emerging devices business. At the time, T-Mobile had just launched its 4G high-speed mobile data network. Competitors had gotten a head start in this market, so we were eager to capture a share of this quickly growing space.

My team launched the company’s first 4G capable devices including connected tablets and mobile hotspots. After a few stumbles and months of hard work, we found that we had a winner on our hands. Our sales team across the country rallied around the new product line to pitch to customers, and sales started ramping up – with high double-digit growth each month.

While initial sales were strong, we soon discovered we had a serious issue. Our churn rate, or the percentage of customers that left us, was over 10% per month! At that rate, we would need to replace our entire customer base each year just to tread water. Further, our business model, when factoring in our projected customer acquisition and operating costs, required we retain customers for much longer to maintain positive CLV. We had a serious problem.

As we got to work on solving for the gap, we found several issues. First and foremost, we were targeting the wrong customers. Many of our customers, which included small business owners or entrepreneurs, had purchased our 4G mobile hotspots as a home or small office broadband replacement, rather than its intended use as a mobile solution allowing connectivity on the go.  We also had the wrong incentives in place. Sales compensation was heavily weighted toward customer acquisition, not retention.

By identifying the right customers and refocusing our efforts, we were able to turn the corner. We revamped our marketing materials, sales and support training, and even tweaked our compensation incentives to ensure that we were positioning the solution to the right customers for the right purpose. Overall, our sales slowed, but churn rate also dramatically decreased. By refocusing our brand strategy, we were more profitable and driving more value for the company – with fewer customers.

The customer retention challenge with T-Mobile is not an uncommon story. In my experience as a consultant, customer churn – driven by a lack of definition or focus on target customers – is a widespread problem. It also explains why on average companies waste more than 25% of their marketing spend on the wrong strategies and channels.

With that overview in mind, here are three key areas companies need to focus on to avoid customer churn:

1. Put your Most Valuable Customers at the center of your brand strategy

Regardless of what industry you work in, serving and over-serving your most valuable customers is the single most important factor in any company’s success. Your MVCs should be the center of gravity for your entire brand strategy – from the products and services you bring to market to your marketing and sales efforts to reach them.

Often when there’s a spike in customer churn, we see companies react and look for a culprit. Comments you may hear include: “The product team isn’t doing enough to improve CX.” “The marketing team isn’t doing enough to retain customers or generate quality leads for sales,” etc. While reacting or looking for a culprit to blame is human nature, this can often lead to short-sighted and siloed efforts by the product, sales and marketing teams.

To be successful in today’s market, everyone across the organization needs to align around a common definition of who the target customer is, what their needs are and what motivates them. You need a single version of the truth around what customers you’re targeting as well as what customers are bad for business. Key questions marketing leaders needs to ask:

  1. Have we done the upfront segmentation work needed to truly know who our MVCs are? 
  2. Do we have the right tools in place, customer insights and data to allow the product, marketing and sales teams to identify, listen to and effectively target those customers? 
  3. What type of customers should we stay away from?  

Leading brands develop a 360-degree view of their MVCs, who they are and how, where and what they buy and why. Identifying your most valuable customers also forces you to make important choices and prioritizations across the business – from your overarching brand strategy to product development, marketing, pricing and customer support.

2. Size your product and experience to the customer

Whether your company is a service provider with a recurring revenue model, or one with a large portfolio of products, you need to know exactly what features, experiences, pricing and messaging are going to resonate with your MVCs or priority segments. Day in and day out, you need to put the voice and experience of your target customers (not all customers) at the center of your product development and CX efforts.

This type of design thinking is absolutely critical for any company to succeed long term. It’s also vital that marketing has a strategic seat at the table with product development team to apply market insights and feedback from target customers to shape future products and CX improvements.

Resist acquiring customers using steep discounts, or getting them in the door by offering a “minimal viable product” with a reduced feature set that will likely not fit their needs. Rather, look to “right-fit” the customer with the product or service option that best meets their needs. That approach is far more likely to build satisfaction and loyalty over time.

3. Embrace experimentation

Customers today expect brands to anticipate their needs in the moment – from their personal shopping preferences to surfacing the right content and experience based on how, where and when they engage. Doing this well requires a cross-company effort to apply both better data and analytics and qualitative insights and voice of the customer feedback to anticipate what your high-value customers want, and in turn surprise and delight them, improving acquisition and retention.

Through experimentation and applying better data and analytics, brands are able to implement strategies to better retain and acquire your MVCs. Key questions leaders need to explore include:

  1. What are low-cost or low-risk ways to encourage trial of a product or service to ensure the right “fit” before a customer makes a purchase decision? 
  2. How do we design our marketing and sales process, onboarding, and overall user experience to ensure the right customer is matched with the right product or service? 
  3. How can we better tailor our brand positioning, messaging and CX to spark interest and loyalty with the right customers, encouraging word of mouth referrals?

Why this all matters

By investing in the right marketing and sales strategy up-front, identifying the right, high-value customers to target, and optimizing for those specific customer journeys, companies can drive far stronger customer growth, retention and brand equity over time. But all of this only works if you’re focused on the right customers in the first place.

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Spotify podcast ads can now track impressions, reach and audience data

The company’s latest offering is a first for the podcast advertising market.

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Spotify has rolled out a new suite of marketing tools for podcast advertisers, making it possible to view impressions, frequency, reach and audience demographic information for podcast ads, the company announced Wednesday.

The new metrics tools are supported by Spotify’s new podcast ad technology, Streaming Ad Insertion (SAI), which utilizes data from the platform’s logged-in audience in tandem with its streaming audio service.

Source: Spotify.

New insights. Spotify is offering podcast publishers and advertisers data on real-time ad impressions, reach (the number of unique listeners who heard an ad), frequency (the number of times a listener heard an ad) and anonymized audience information such as age, gender, device type and listening preferences.

The anonymized demographic data first arrived for podcast publishers in August, 2019.

Why the data is available now. Spotify requires users to log in, providing the company with basic demographic data on the listener. The shift in audience preferences from downloading episodes via RSS feeds to streaming them has enabled companies to extract more information on listening habits.

Why we care. The podcast sector has grown by leaps and bounds, but for all its popularity, the lack of targeting and reporting data has kept many brands from investing in podcast ads. 

Now that advertisers and publishers can get more precise information on whether their ads are getting listened to, who and how many people are listening to them, the medium is more transparent and more likely to attract new advertisers, which may help to continue the sector’s momentum.

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Machine learning will free up time to be more strategic with accounts in 2020

Data is giving us an opportunity to look at bigger picture decisions in our accounts rather than the day-to-day work we have been doing.

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Contributor and SMX speaker, Brooke Osmundson, explains how machine learning is changing our account work and why we need to be smarter about layering our campaign assets in 2020.

Below is the video transcript:

Hi, my name is Brooke Osmundson and I am the associate director of research for NordicClick Interactive. And today I want to talk about the top things that marketers should focus on the most for 2020.

The first thing I want to talk about is machine learning. It’s no secret that it is part of our lives right now, and part of your jobs. But what I’m thinking is going to happen is, it’s going to shift your focus on what you’re doing day-to-day within your accounts. We’re going to see less tactical pieces that we have to focus our time on. And it’s really going to help you be more strategic in your account. So with machine learning, what data can give you, what can it do for you to free up more of your time to start thinking more bigger picture and focus on those bigger picture decisions.

The second piece I want to talk about is audience layering on top of your campaigns with the differences in search or match types. You know they’re kind of not a thing anymore, so we’ve got to be smarter about layering on the assets that we have available to us in our campaigns in order to really reach our right customer based on what we know about them.

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2020 will be the year to get our data right

A reliable data flow will help automation tools we started to use in past years do their jobs better.

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Contributor and SMX speaker, Aaron Levy, shares his insights about why it’s the “year of getting our data really, really right” and how that will impact paid search automations in 2020.

Below is the video transcript:

Hi, my name’s Aaron Levy. I’m the group director of paid search at Tinuiti. I think 2020 is going to be an interesting year of a mix of some of the things that we talked about for the past couple of years.

It’s already been the year of mobile.

It’s already been the year of automation.

It’s already been the year of people.

I think this year is going to be the year of data. All those things that we’ve been building up for the past couple of years, having Google automate all of our bids and our keywords and things like that that only works with really good data.

So I think that this upcoming year, in 2020, it’s going to be a year of getting our data really, really right. Getting it to flow back and forth, getting it to pass back and forth, so that then these automation tools that we started to use in the past years can do their jobs a little bit better.

I’m pretty excited about it, honestly, because I’m really sick of doing manual bids by myself. Or having my team hit the same button a million times.

If we can get good data into the search engines to have their smart tools do what they’re really good at, that’s how we’re going to do really well in growing into the future.

I think that 2020 is going to be all about data, all about data flow, all about data passed back and all about getting it right.

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New challenges ahead for attribution with the rise of intelligent tracking prevention

With a projected 30-40% loss of user data in Safari with ITP in 2020, marketers are going to have to re-think how to handle attribution in the coming year.

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Contributor and SMX speaker, Simon Poulton, is focusing on intelligent tracking prevention (ITP) in 2020 because he believes Safari is going to present the biggest obstacle facing digital marketers from a measurable point of view in the year ahead.

Below is the video transcript:

Hey, I’m Simon Poulton. I am the vice president of Digital Intelligence at WPromote, and today I’m gonna talk about some of my thoughts about 2020 and the road ahead.

I think one of the biggest trends that we’ve seen in 2019 is actually the increased focus on user privacy. Obviously, we’ve seen lots of technology, but we’re also seeing some legislation around this space. Particular things like CCPA, we know that’s going to come in very early.

But I think the biggest thing facing digital marketers from a measurable point of view is the way intelligent tracking prevention. ITP is going to impact the way that we can handle attribution. And the way that we think about just the ability to measure across Safari.

It doesn’t sound like a big deal to a lot of folks, but we think that we’re going to see about 30 to 40% of data being lost for Safari users in the future, which is going make it really hard as we think about the future of, you know, should this be in these platforms. Where do we go from here? It’s a very hard decision to make for a lot of marketers.

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Businesses need to think differently about customer feedback data in 2020

Improving the customer experience and improve your business operationally means keeping up with the many ways customers communicate with you.

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Contributor and SMX speaker, Adam Dorfman, thinks the customer feedback ecosystem is going to play an even more important role in the coming year for businesses looking to improve operations and the customer experience.

Below is the video transcript:

Hi everybody, my name’s Adam Dorfman. I’m a director of product growth at Reputation.com and I’m going to talk about some of the trends and one big important trend that we’re seeing right now and that we think it’s going very much carry over into 2020. And that’s how up until recently, the way most businesses would think about how their business was doing was through the use of surveys and collecting survey data. Specifically, MPS being a metric that many businesses like to use to determine how well they were performing.

An example of an MPS question would be: On a scale of 1 to 10, how likely are you to recommend this business to a friend of yours?

And if it was an eight or higher, that was great. And if not, it was lower. And that’s still very helpful because you can ask your customers directly, after you know they visited your business and things along those lines, still a fantastic way to gage sentiment. However, it’s a very small part in all the places that customers, your customers, are leaving information about your business.

When you think of the customer feedback ecosystem, or the customer feedback economy, whatever you want to call it, there’s many, many places where information about your business is being left. And those could be on review sites. They could be on question and answer sort of sites like Google My Business Knowledge Panels, or the site Quora. It can be in forms. It can be messaging. It can be all sorts of different, all sorts of different places.

If you aren’t tracking all of those different places in the wild, where this information is being left either solicited or not solicited, more often than not, not solicited, you’re missing a huge opportunity in being able to understand what customers truly think about your business and how to improve your business operationally, to make a better business and to improve the customer experience.

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The California Consumer Privacy Act goes live in a few short weeks — Are you ready?

There’s still time to register! Join us on December 17th for this live webinar.

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The California Consumer Privacy Act – or CCPA – creates strict new requirements and processes for all brands that sell to consumers in California.  Join OptiMine CEO Matt Voda as he explains how CCPA will impact your marketing , including potential problems and accuracy issues around multi-touch attribution. You’ll hear best practices and options to move forward and improve your marketing measurement, even in the face of expanded consumer privacy regulations across the U.S.

Attend this webinar and learn:

  • The specific CCPA rights and requirements that will impact all brands
  • Financial and compliance risks brands now face – and how to reduce them
  • How the CCPA will impact common types of marketing measurement

Find out how to reduce the financial and compliance risks brands now face. Register today for “CCPA Goes Live in Weeks: Is your marketing measurement ready?” presented by Optimine.

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Amazon ad spend rises over Cyber 5, but most efficient sales days still ahead

The five-day stretch from Thanksgiving to Cyber Monday was record-breaking for e-commerce but brands still have more time for profitable sales on Amazon.

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On Cyber Monday alone, consumers spent $9.4B via online channels – that’s up $1.5B from just last year, according to Adobe, and another record-breaking figure in terms of e-commerce sales. For marketers, the entire five-day stretch dubbed “Turkey 5” by Amazon (also known as Cyber 5), was likely a banner sales weekend, but looking at year-over-year Amazon data, what’s clear is that your holiday fortunes are not made or broken on that period alone.

As part of the research my company conducted, it is clear that on a conversion rate and cost-per-conversion basis, some of the best sales days on Amazon come after Cyber Monday. To maximize your total sales, and potentially capture market share from competitors, your advertising budgets and strategy on the site needs to align with this reality.

As seen in the below graphs, which are drawn across a same-set of more than 700 Amazon sellers, ad conversion rates continue to rise from Cyber Monday all the way through the Dec. 22 shipping cutoff. Yet, the average cost-per-conversion declines over the same period.

This is likely due to two contributing factors.

Perhaps most impactfully, many brands budget to spend aggressively during that five-day period and, due to the extremely high volume of consumers on the site, blow through a fixed budget for the season. While those holiday period campaigns may have driven high sales volumes at profitable costs, those same brands now don’t have the ability to stay aggressive over the intervening days, substantially tapering down spend and bids through the remainder of the year and missing out on these additional profitable sales.

Secondly, when consumers are shopping on Amazon a matter of weeks or days before Christmas, they are less inclined to do a great deal of research when buying their gifts. Time is of the essence, and the data bears out that users are more likely to click and convert on a sponsored product ad during this period.

In 2019, that latter point may be even more important, as the time between Cyber Monday and Christmas nearly a full week shorter, lending itself to more “last minute” holiday gift buying.

The bottom line is that on Amazon, it’s imperative that you consider uncapping budgets around holiday periods and other high-traffic events on Amazon in particular, provided you have the ability to set and adjust bids to align with the value of a given sale after discounts, fees, etc.

This is driven home by the overarching trend over the five-day period itself. Even in the face of a large number of sellers aggressively advertising during this time, the massive amount of consumers coming to Amazon and subsequently clicking on ads outpaced that rate. Across gift-giving categories and more than 219,000 products, Amazon ad spend was up significantly, but CPCs either remained flat, declined, or rose at a level far below the corresponding spend increase – compared to the prior four-week average.

In a sense, it was easy for a brand to spend substantially more on Amazon advertising over “Turkey 5” – we saw a 92% increase from pre-holiday levels on average – but they were likely driving sales at a more profitable rate from that ad spend. With conversion rates remaining high following Cyber Monday, that efficiency is likely to increase, albeit with less traffic overall.

Maximizing the holiday home stretch and beyond

With some time still remaining until the Dec. 22 shipping cutoff, there are some tactical levers brands can pull to capture more of those profitable sales. We talked about the value in uncapping budgets through Dec. 22, but that needs to be paired with bids that are set in line with any promotional or non-promotional pricing which may be in place for a given product.

By consistently bidding to value on an individual product level, brands can bring in more profitable sales on Amazon during these high traffic periods. Additionally, this is a good practice year-round, as it minimizes the risk of wasting ad spend while allowing for scale when a bump in user purchase activity warrants additional investment.

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Get more done with Agile marketing

Learn how to put Agile to work for your organization. Join us this Wednesday, December 11th , for this live webinar.

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Marketing is always changing. And with that constant change comes greater expectations to produce ever-better results at a rapid pace with limited resources. Now more than ever, marketers must be ready for whatever comes their way — and they must be equipped with the right tools and processes to get results.

To keep up, marketing teams are making big changes to how they manage their work and create differentiating content by adopting an Agile methodology. Join our experts as we explain how Agile marketing allows you to be more organized, get more done and be more responsive to market changes or shifting company strategies.

Don’t miss this live webinar! Register today for “4 Ways to Get Started With Agile Marketing,” presented by Workfront.

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