The Fifth Law of Customer Retention

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The Fifth Law of Customer Retention
Improving Customer Retention is a Bi-Product of Fixing the Breakdowns of Previously Failed Customer Experiences

In the first four Laws of Customer Retention, we defined a series of equations that describe customer retention and the major forces that influence it. A summary of these is detailed below to insure we are all on the same page:

  1. The First Law of Customer Retention — Predicting the probability of whether or not a business will retain a single customer:
The First Law of Customer Retention Summary

2. The Second Law of Customer Retention — Understanding the various states of a customer’s retention journey and how to measure its breakdown over time:

The Second Law of Customer Retention Summary (1)

3. The Third Law of Customer Retention — Understanding that your current retained customers attract new customers into your product experience and how to measure the effect of that advocacy:

The Third Law of Customer Retention Summary (2)

4. The Fourth Law of Customer Retention — Calculating the impact of your cross-channel messaging campaigns on your product’s level of customer retention:

The Fourth Law of Customer Retention Summary

These four theories, or laws, are key to understanding the level of customer retention present within a product experience. Within the expanded article on each law, we have described specific “levers” that you can use to increase customer retention levels. Typically, a business will see the impact of their actions in this area show up in their standard 30- and 60-day retention curves.

The direction the curve moves will tell you if the changes made resulted in a positive or negative impact to your business. Below you will find the four main shifts and what they mean. Note, both a shift and a slope change can happen at the same time; they are not mutually exclusive.

Customer Retention Curve Breakdown (2)

Driving Systematic Increases to Your Product’s Customer Retention Levels

So how do you drive systematic increases to your product’s customer retention level consistently over time? This is the whole point of reading this article series after all. In order to put these four laws to good use, we need the overarching strategy to deploy them through. Further, they provide a way to benchmark different aspects of retention and why you are falling short there, but they don’t provide a way to pinpoint the spot in your product responsible for low levels of customer retention.

Figuring out where to focus efforts and what changes to make to your digital product from a ten-thousand-foot view is typically a challenging step that many teams don’t get right. Many teams spend more time looking for the problem to solve as opposed to figuring out a solution to the root cause. This insight should be available at your fingertips and should model the flow of users and their behavior (actions and context) throughout their experience.

At the core of this insight are the breakdowns of previously failed customer experiences. Analyzing these failures is the key to understanding what changes should be made to ensure the next customer doesn’t trip over the same hurdle, preventing them from reaching the value the product offers. The below table can be used to classify your digital product and analyze breakdowns with the proper context to create impactful improvements from.

Classifying Your Digital Product & the Breakdowns Typically Seen Within Each Product Genre

Products in the Transaction Genre

The Transaction Genre: Products in this genre help customers make purchase decisions with confidence. Companies you will often find in this genre are e-commerce platforms. (3)

Consider Frito Lay’s Snacks.com, a DTC web app where you can buy snacks and get them shipped right to your front door. The goal of this experience is to get you the snacks you want as quickly as possible without ever having to go into a store.

Frito Lay Snacks.com Customer Journey Example with Spring Race Context to Support

It’s typical for people to trip up on one or two main hurdles (create account and checkout for example) in this genre of digital product. The goal is to find which hurdles people trip over most often and lower the barrier by decreasing the effort and time to get over it. Teams can also raise the value on the other side of the hurdle to give people more motivation or confidence to get over and through it.

Frito Lay Snacks.com

Products in the Attention Genre

The Attention Genre: Products in this genre are trying to maximize the amount of time people spend in the product. Industries that typically align to this genre are media, gaming and any company displaying advertisements to you. (3)

Consider TikTok, a social media platform designed to connect you with people and content you are interested in. Their goal is to get you engaging on the platform and with other people while at the same time viewing strategically placed advertisements which remove the need for any payments to be made.

TikTok Customer Journey Example with Scenic Hike Context to Support

The difference between this journey type and the transaction sprint race journey is that the goal is to keep people in the product for as long as possible, not to get them to perform a transaction as fast as possible. This means you create features like an endless timeline, so people always have something to expect when opening up the app for another “hike”.

It’s typical for people to become bored and uninterested due to lack of friend connections and / or for boring, uninteresting content. The goal here is to see which hills the people in your product are losing momentum on and enhance that part of the experience by making it easier to connect and find personalized content or games. TikTok has made onboarding into the product a step typically presented and completed after people have engaged with some content from a link share. Further, people are attracted to the allure of building followers at a growth rate not seen on other social media platforms.

TikTok — iOS | Android

Products in the Productivity Genre

The Productivity Genre: Products in this genre create an easy and reliable way to complete an existing task or workflow. This game is prominent in business-to-business solutions. (3)

Consider Robert Half Direct staffing and time sheets mobile application which helps job seekers and contractors manage their job search activities and keep their timesheets efficiently. They aim to make a traditionally cumbersome task of finding personalized jobs and manaing any contracted time you work there easy and efficient.

Robert Half Direct Customer Journey Example with Obstacle Course Context Supporting

This customer journey type is unique in the sense that it’s about efficiency, not simply removing time and effort (transaction game) or maximizing in product time (attention game). It’s somewhere in-between those two. It’s typical for people to either fail to accomplish the task they set out to solve or to have an experience that was less efficient by their own measure.

The goal here is to not only understand what obstacle is tripping up the people in your product experience, but to also insure it’s solving the right problem in a more efficient and / or engaging way than current main streams solutions. This often requires strong qualitative insights based upon regular customer feedback sessions.

Aim to solve the task or workflow in question by making it less cumbersome to complete and infuse it with more surprise and delight. Tasks and workflows can become boring and repetitive creating a bigger growth opportunity for experiences that go the extra mile here. Robert Half has a personalized machine learning backend which matches and alerts job hunters of new opportunities that they are a good fit for within their target geo-location for example.

Robert Half — iOS | Android

Product Genre Matters When Solving Problems

One of the most important things to realize when trying to troubleshoot your product to increase growth is that the genre of your product and business and the context that govern those products matters a great deal. The goals of your customers and how your product is geared to deliver on those has everything to do with being able to craft solutions to problems with the intuition needed to improve it. Trying to improve your product without this understanding and without a highlight reel of past breakdowns is effectively operating a vehicle blind and without the user manual.

You simply cannot operate it effectively without it. On the other hand, teams that have this understanding and insight have a method and the intuition needed to maintain and improve the product experience they manage. Improving retention is the by-product of wielding this understanding and intuition to make changes that maximize the value exchange between the customer and the product.

The Product-Customer Value Exchange Summarized for all Three Product Genres. (3)

In summary, teams that use a method to enable them to focus their problem-solving skills on the root cause to customer experience breakdowns as opposed to figuring out where the breakdown exists and which one to tackle first have a higher chance of improving their customer retention than teams that don’t. Further, teams should create solutions and deploy changes based on the right context and then analyze their standard 30- and 60-day retention curves to assess if the change was positive or negative based upon how the curve shifts or slope changes. The consistent iteration over this collective process is how you fix the breakdowns of previously failed customer experiences and ultimately drive and grow long-term customer retention.

#1 — https://help.amplitude.com/hc/en-us/articles/228838627-The-Lifecycle-chart-track-the-growth-of-your-product-s-user-base

#2 — https://www.reforge.com/blog/word-of-mouth-coefficient

#3 — https://amplitude.com/mastering-engagement

#4 — https://amplitude.com/mastering-retention

This post, and the other four in the series, were written and originally published by our friends and colleagues at Bottle Rocket. To learn more, visit www.bottlerocketstudios.com

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